Term life insurance, also known as pure life insurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the term life insurance policy to terminate.Term Life Insurance approaches give high life cover at lower expenses. For eg: Premium for 1 Cr Term Life Insurance Cover could be pretty much as low as 490 p.m. These fixed charges can be paid on the double or at ordinary stretches for the whole strategy term or for a restricted period.
KEY TAKE AWAYS Term life insurance guarantees payment of a stated death benefit to the insured's beneficiaries if the insured person dies during a specified term.These policies have no value other than the guaranteed death benefit and feature no savings component as found in a whole life insurance product. Term life premiums are based on a person's age, health, and life expectancy.
How Term Life Insurance Works
When you buy a term life insurance policy, the insurance company determines the premiums based on the value of the policy (the payout amount) as well as your age, gender, and health. In some cases, a medical exam may be required. The insurance company may also inquire about your driving record, current medications, smoking status, occupation, hobbies, and family history. Anybody with financial independence should purchase a Term Protection Strategy.
Term life policies have no value other than the guaranteed death benefit. There is no savings component as found in a whole life insurance product.
Types of Term Life Insurance
There are several different types of term life insurance; the best option will depend on your individual circumstances.
1. Level term, or level-premium, policies.
These provide coverage for a specified period ranging from 10 to 30 years. Both the death benefit and premium are fixed. Because actuaries must account for the increasing costs of insurance over the life of the policy's effectiveness, the premium is comparatively higher than yearly renewable term life insurance.
2. Yearly renewable term (YRT) Policies
Yearly renewable term (YRT) policies have no specified term, but can be renewed each year without providing evidence of insurability. The premiums change from year to year; as the insured person ages, the premiums increase. Although there is no specified term, premiums can become prohibitively expensive as individuals age, making the policy an unattractive choice for many.
3. Decreasing term policies
These policies have a death benefit that declines each year, according to a predetermined schedule. The policyholder pays a fixed, level premium for the duration of the policy. Decreasing term policies are often used in concert with a mortgage to match the coverage with the declining principal of the home loan.Once you've picked the policy that's right for you, remember to research the firms you're considering thoroughly to ensure you'll get the best term life insurance available.
WHO SHOULD BUY A TERM INSURANCE POLICY?
Hence, individuals who derive any of the three significant benefits associated with term insurance should consider buying such policies. The three significant benefits are life protection, tax-saving and affordable premiums. Parents, Newly-married, Working Women, Young Professionals, Taxpayers, Self Employed, SIP Investors, Retirees.
What are the Benefits of Term Insurance?
Following is a list of benefits that a term insurance policy can provide you:
High Sum Assured at Affordable Premium
Easy to Understand
Multiple Death Benefit Payout Options
Income Tax Benefits
Critical Illness Coverage
Accidental Death Benefit Coverage
Return of Premium Option