Home Insurance What is term life insurance? Types & Benefits

What is term life insurance? Types & Benefits

0

A person who has term life insurance creates an avenue for beneficiaries to secure benefits after they pass away. This type of insurance is not very profitable to the insured. So when an individual signs up for this plan, it’s because they care about the financial future of their family and loved ones.

In other words, it’s a thoughtful way to show love, care, and affection even in your absence. The good part is that there are no special requirements for this plan. Anyone who is above eighteen can purchase a term life insurance.

While this insurance is not compulsory under any law, it guarantees that your beneficiaries will enjoy financial support when you are no more. This article will further discuss what to expect with this policy.

Definition of term life insurance

Term life insurance is the best form of life insurance that covers your beneficiaries in the event of your passing. It is a good way to plan for unforeseen situations that could burden your family.

Fortunately, term life insurance is the most affordable of all life insurance products. It typically lasts between 10 and 30 years, and the policy term can be adjusted to fit the needs of your loved ones. The only restriction to getting this plan is age.

Only individuals over 18 are eligible for life coverage, which they can also renew for as long as they want.

Types of term life insurance

  • Level-term policy: This plan is the most popular due to its simplicity. Here, the price for coverage is the same throughout the policy duration.
  • Yearly renewable policy: Policyholders can renew this annually without a medical exam.  The cost of the premium on this plan increases with time.
  • Return of premium policy: Even though this is the most expensive policy, users have nothing to lose if they live to the end of this contract. This plan has an option to return all the premiums if users live to see the end of the policy.

How it works

When you apply for this plan, insurance companies weigh your risk level through an underwriting process to determine your premium. This plan provides a flexible payment structure for your convenience.

You can pay annually, quarterly, semi-annually, or one time. However, it is advisable to make a lump sum payment for premium benefits if you can afford it.

Also Read:  What is health insurance?

In exchange for premiums, you get a life cover, which may run for the period your contract allows. Policyholders can always update the coverage to include or exclude certain people

It’s important to note that this is not an investment vehicle, so the insured must not expect returns from insurers. However, they can take comfort in knowing their nominees will get financial support when necessary.

Should you pass away during the policy term, your beneficiaries just need to present your death certificate and a claims form to access their money. After verifications, your insurers can disburse funds to support your beneficiaries.

The total amount they get depends on your coverage plan and premium. A human Life Value Calculator will help you get accurate details on the right amount of coverage you need.

Benefits of term life insurance

Tax benefits: Your beneficiaries enjoy tax-free benefits, which means there’s no need to pay tax on the money they receive. This is the case unless policyholders pay for coverage with pre-tax dollars.

Affordable: Term life insurance is generally cheaper than permanent life insurance. This is due to the absence of a cash value component and the temporary coverage it provides.

Level premium: This is common with this insurance type. It means the premium does not change throughout the contract duration, so policyholders will not have to deal with sudden increases or premium adjustments. However, not all life-term plans have level premiums.

Conclusion

To sum up, this article highlights everything there is to know about term life insurance. It is a necessary plan everybody should consider getting.

LEAVE A REPLY

Please enter your comment!
Please enter your name here