Understanding What Is Term Life Insurance
Understanding what is term life insurance is easy as it is the simplest pure form of life insurance. It is the original form of life insurance with no cash value built in. It is also the cheapest life insurance available in the market. All it offers is coverage of a specific sum insured for a period of time in case of the death of the insured. If the insured dies before the expiry of that period then the death benefits are payable to the beneficiary.
Term insurance costs will vary according to some of these factors: age, family medical history, occupation, sex, female or male, history of tobacco and alcohol usage, history of your driving records and your own health history.
Uses For Term Life Insurance
Due to the nature of this type of life insurance, it is mostly used to cover the insured’s financial obligation, be it debt, dependent care, funeral costs or mortgages.
It is a popular form of insurance to take when the children are young as it will help protect against the bread winner’s loss of income in case of premature death. It provides the maximum protection at costs that you can afford. The death benefit is income tax free to the beneficiary.
As a mortgage protection insurance or as insurance against any debt or loan taken, it is taken to pay off the debt in case the insured dies.
Business people also buy these policies especially when their businesses are still at the early stages of growth.
The policy can be paid for monthly or annually and is normally renewable for the term the policy is in force. The most common terms are 10, 15, 20, and 30 years.
Failure to renew renders the policy lapsed and therefore null and void.
It is good to note that term life insurance doesn’t have cash value which can kick in to pay for the premium in case of delayed payment.
Some term insurance policy require the proof of insurability every year on renewal of the policy.
However you can always get the annual renewable term (ART ) which guarantees renewal without proof of insurability. The disadvantage of an ART is the fact that the premium increases every year.
Another more common type of insurance is level term life insurance.
Here the premium is guaranteed to be the same for a given period of years which ranges at 10, 15, 20, and 30 years.
Usually you can request for a renewable clause which guarantees renewal at the same rate. This is very useful if the health of the insured is not favorable.
Term life insurance rates are available online although it is recommended that you read the terms and conditions of the policy before making a decision. Look for companies that offers no medical exam term life insurance which require you answering a few health questions with no medical examination.
Finding affordable term life insurance is not difficult. Always make sure that the company has been around for a while and has a good reputation even if you are looking for a whole life insurance or a term insurance.
We hope this has thrown some light into what is term life insurance. To offer your family protection look into this type of insurance which offers you the best protection at the lowest cost.
