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Of all the life insurance types, term life insurance is, bar none, the easiest to understand. Simply put, it is a type of insurance wherein the policy holder just needs to pay a very minimal amount per thousand of dollars of coverage paid out on an annual, semi-annual, monthly, or quarterly basis. The life insurance provider will only pay the beneficiary of the policy holder if and only if the insured party will pass away within the duration of the policy.
Below are the distinctive characteristics of term life insurance policy:
- Term life insurance can be described as pure insurance because of the fact that when you purchase a policy, you are, in effect, buying a benefit that can only be claimed when you pass away. There is no additional monetary value to it, unlike going for permanent life insurance like whole life, variable universal life, as well as universal life.
- The coverage will last only for a certain period of time, hence the name “term.” It can be for as long as a year, five years, ten years, fifteen years, twenty years, and so on. It can only remain in force until the end of the term, and it can only remain in force if and only if you keep on paying the premiums.
- Most terms life insurance cover can be renewed at the end of the term, that is, if the policy holder does not die within the term and wishes to still be able to make sure his beneficiaries will get something upon his or her demise, he or she can still have it renewed up to such time that the policy can be used. However, there’s a catch to this. The older the policy holder gets, the higher the premiums. A good alternative to this is a term policy that has the same premium, but then, it’s the benefits that would depreciate as time goes by.
- You have the option to convert term policies into permanent life cover after a specific number of years. If you want to be sure to maintain the coverage, then you should strongly consider converting into a permanent policy. Of course, you should expect to pay higher premiums but with better benefits at the same time.
You should get a term policy if you want to make sure you protect your dependents from sudden monetary problems when you pass away. Among the most common used of it are the following:
- For mortgage payments.
- For personal costs due to sudden death.
- For augmenting business costs.
- For augmenting the loss of a key person in a company.
You may not be thinking about getting insured as early as now, especially if you are still single and do not really have a lot of responsibilities when it comes to financial aspects as of yet. But then again, in the event that you finally decide to settle down and have a family of your own, you can definitely see the value of being insured. Keep in mind, the younger you get insured, the lesser the premiums. Be responsible.
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