Term Insurance

Term Insurance: What you need to know

Most people often wonder if getting an insurance is the right thing to do or not. If you’ve been troubled by such thoughts then imagine a world without you in it. Would your family be financially okay? If you are not so sure, then it would be better if you start shopping for good life insurance. With life insurance, you can have peace of mind and sleep better knowing that in an event of your death, your family and loved ones will be financially taken care of.

Most people turn to term life insurance when they are looking for the best insurance that can cover the common financial burdens involved in raising a family. With term life insurance, you can create a safety net that can cater to your family’s mortgage funds, college funds, and other fundamental needs that may arise if you were no longer around. Are you thinking of getting term life insurance this year? Then in today’s post, I’ll be showing you all you need to know about term life insurance.

What is Term Insurance?

Term insurance is a type of life insurance policy that provides financial coverage for the family of the insured upon his death within the specified duration of the policy. The beneficiary named on the policy will receive death benefits from the insurer. In term insurance policies, you can get financial coverage for your family for a specified “term” of years. Term insurance is usually much less expensive than permanent life insurance. There are two main characteristics of term insurance which are:

  1. For any financial benefits to be made, the insured must be dead.
  2. The contracts expire at the end of the specified term.

Hence, if the insured lives beyond the specified term, no payment will be made.

Types of Term Insurance

There are various types of term life insurance you could go when applying, these includes:

Convertible Term life insurance

This is a term life insurance policy that allows a the insurance policy to be converted into a whole life or permanent insurance. In convertible term life insurance, the policyholder does not have to undergo any medical examination, and there are no health conditions involved when the term policy changes to permanent insurance.

Increasing Term life insurance

This life insurance policy enables you to increase the death benefits your loved ones would get A time goes on. Although premium policies can increase as well, but increasing life term insurance allows you to pay lower premiums early on in life when you have lots of expenses already. In other words, increasing term prevents you from having to qualify for another policy at an older age to be able to get some added benefits usually common in traditional term insurance.

Decreasing or Mortgage Term insurance

This is the opposite of increasing term insurance. In mortgage term insurance, the death benefit decreases over time. The aim is to match the term benefit decline with the reduction of the outstanding mortgage.

Annual Renewable term insurance

In this type of insurance policy, the term insurance is renewed yearly for a higher premium policy. The death benefit for annual renewable term insurance is approved each year.

How does Term life insurance works?

To properly understand the term life insurance, you’ll need to know how it works.

1. The Policy Agreement

A term insurance policy is a legal agreement between you and an insurance company. There are different kinds of policy agreements which you can make, but most commonly people try to cover the fundamental financial needs of their loved ones upon their departure.

2. Completion of the proposal form

To successfully dill the application form, you’ll need to disclose your:

  • Current medical conditions
  • Medical history
  • Lifestyle and habits
  • Age
  • Annual income
  • Nature of profession

3. Evaluate your requirements

  • Decide on the total life coverage. The coverage should be able to meet the needs of your dependents.
  • Select the perfect policy term. Determine the duration for which your family or loved one will require financial support. It can be until your children complete a college education or until your retirement.
  • Select a premium payment mode. Policy term plans allow one-time payment of the entire premium or regular periodic payments throughout the policy duration or for specific time frame.
  • Select your payout pattern.

4. Examine the Premium quote

The insurance company will provide you with a premium quotation based on your details. After payment is made you will get the coverage.

5. Assign a Nominee

You are required to register the name of the person that will receive your term plan benefits. It could be your family member or any of your dependants.

How to select a term life insurance length

To select the best length of term life insurance policy, you’ll have to take into consideration the size of the debt and condition you wish to cover.

For instance, if you wish to buy a term life insurance plan that will cover the financial needs until your children are through to college, and that is expected to be in 9years, then you might pick a 10-year term life insurance. Or if you just got a house through a 30-year mortgage, then you’re most likely looking at a 30-year term Life Insurance.

Term life insurance is usually available in lengths of 5, 10, 15, 20, 25, and 30 years. Some companies over longer terms of 35 and 40 years.

Christophe Rude
Christophe Rude
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