Finance
Term Life Insurance: Everything You Need to Know About It

Term Life Insurance: Everything You Need to Know About It

Everyone seeks financial security. But not everyone knows how exactly to secure the future. Term life insurance is one of the best ways to secure the future. Many companies offer insurance policies in India. But before buying one, you need to know what exactly it is. What are its benefits? How is it helpful? Is it worth buying? Advantages, features, etc. We will help you get a clear picture of the insurance policy right away. In this article, you will find all the necessary details regarding term life insurance.

What is Term Life Insurance?

Also known as pure life insurance, term life insurance is a type of life insurance. It guarantees the payment of a fixed death benefit if the benefiter dies during a specific time period. The policy provides coverage at a fixed payment rate for a limited period of time. Once the policy expires, the holder can either renew it for another tenure, convert it into permanent coverage, or terminate the policy. Term life insurance is the most inexpensive way to purchase a death benefit. Even if the policyholder dies during the term, the money is transferred to his beneficiary.

How Term Life Insurance Works?

When you go to purchase a term life insurance policy, the insurance company determines several factors. The most common factors are age, gender, and health. Sometimes, they even conduct a medical exam. The insurance company also investigates the family history, addictions, driving records, current health status, and occupation. If the insured person dies during the term, the money is transferred to his beneficiary. Beneficiaries can use this cash amount to pay off the holder’s debts, loans, and other liabilities. However, if the policy expires before the holder’s death, there is no payout. The holder will have to renew the policy. But the premiums are recalculated at the renewal.

Who can Purchase the Policy?

Anyone can purchase a term life insurance policy. It is a traditional insurance plan. Moreover, it is a financial investment and everyone should come forward to buy it. It not only secures your future but also adds to your financial instruments. Any individual who is the bread earner of their family should go for it. If you have liabilities over you, consider buying a term life insurance policy. This policy is a security that will help even after your death.

Features of the Term Life Insurance Policy

Have a look at the key features of the term insurance policy.

#1 Minimum Premium Costs

Term Life Insurance policy guarantees maximum financial independence at affordable premium costs. It is better than those critical illness insurance policies. Term insurance provided benefits depending upon your age.

#2 Easily Accessible

A term life insurance policy is easily accessible. It is a very transparent process as all the information is available online. All you need is a good insurance company. You can even calculate the premiums on your own. It is a very simple and hassle-free procedure.

#3 Future Investment

Term life insurance policy is a very good investment for the future. Making monetary investments from a young age secures the future. It is a financial instrument that will give you long-term benefits. Term insurance is one of the easiest ways to safeguard the future.

#4 Flexible Payment Options

There is no fixed time period for term insurance payment. You can pay according to your convenience. The holder can choose from monthly/quarterly/yearly payment options. It gives you the liberty to choose your own payment plan.

#5 Flexible Payout Options

The holder can even decide the payout options according to their convenience. If you think that your family will spend all the money at one time, you can opt from various payout options. The insurance company will regulate the payout as you have decided.

Types of Term Life Insurance

Given below are the different types of term insurance. Have a look at them

  • Level term, or level-premium policies

These policies provide coverage for a particular time period, ranging from 10 to 30 years. In this policy, the death benefit and premium are fixed. However, the amount of coverage provided increases. A level term policy assures that the beneficiary will receive a sum of money after the holder dies. It ensures security and safety. Level premium policies are quite different from standard term life insurance policies. In standard policies, premium rates rise as the policy ages.

  • Yearly renewable term (YRT) policies

These policies have no specific time period. But one can renew them without providing insurability evidence. In YRT, the premiums keep changing every year. The premium increases, as the insured person ages. However, this policy is not very popular among folks. Not many people opt for this. It is also referred to as annually renewable term insurance.

  • Decreasing term policies

These policies have a death benefit that decreases every year. In this type of insurance policy, premiums are always constant throughout the contract. The policyholder has the liberty to choose a plan tenure. Usually, when the plan is matured, the sum assured reduces to zero. If the holder dies within the term, the nominee receives the applicable amount.

Difference Between Term Life Insurance and Whole Life Insurance

Term life insurance occurs over a fixed period of time. Usually, 10 to 30 years. However, the holder can renew the policy once it expires. The premiums are recalculated according to the holder’s age at the renewal time. Other factors such as life expectancy, health issues, etc. are also considered. Meanwhile, whole life insurance covers the holder’s entire life. It includes a saving component. In this component, the cash value of the contract hoards for the holder. The holder can also extract or borrow against their policy portion.

Does the Holder Get the Money Back at the End of the Policy?

If the holder outlives the policy, they will not receive any money after the policy expires. The holder can renew the policy when it is about to expire. Moreover, the premium amount is recalculated at the time of renewal. If the policyholder dies, the insurance amount is paid to his beneficiary.