Term Life Insurance Policy

Introduction

Term life insurance policy is an easily understandable scheme, and is made to provide temporary life insurance protection at a less expensive rate. People usually choose this option to meet their short term goals like paying off a loan or getting extra protection during younger ages.

The periods of term life insurance coverage may slightly differ according to different states, but at length, term life insurance policy provides level premiums for 5,10,20 and 30 year periods. Although one can renew or continue his policy at higher premiums rates. Term life insurance policy premiums are basically much cheaper than cash-value policies (universal and whole), particularly when one is young and in good health.

Some principal features of term life insurance policy:

Accessibility

Most term life insurance policies provide adjustable premiums, means premium rate may rise or fall based on certain conditions. But usually premiums do not cross the maximum premium limit as declared in the policy.

Easy renewal facility

One can renew his policy according to his needs, but each time one renews, the premium cost will increase according to his present age. This right is usually offered for a certain period of time and varies according to the type of the policy.

Conversion

One can exchange a term life insurance policy with any permanent life insurance policy offered by the agency at any time (when the policy is in effect) he needs.

As term life insurance policy provides a pure death benefit, its basic use is to cover financial obligations of the insured. Such obligations may comprise of but are not limited to consumer debt, dependent care, college education for dependents, and mortgages.

Claim benefit

If the the insured person dies during his coverage period (usually one, five or ten yrs.), the death benefit is normally given to the beneficiaries. Although the death benefit varies according to the level (increasing or decreasing) of term life insurance policy.

Term life insurance policy does not actually make cash-value or tax benefits like universal or whole life policy, but it can be a beneficial option for someone who needs life insurance, but is not financially capable of giving higher premiums.

Advise by experts

While dealing with customers of term life insurance policy, normally the agents do not get any major commission, what he generally gets while dealing with any cash-value policy. For this reason, the user should always be very cautious to know everything regarding the terms and conditions of any policy coverage.

Terms and conditions

Depending on different age groups of the customer, the term of any term life insurance policy can be subdivided into five parts. These are:

Annual renewable term insurance policy

Renewable term insurance policy

Level premium term insurance policy

Convertible term insurance policy

Decreasing term insurance policy

Annual renewable term insurance policy

This sort of policy is mostly beneficial for themselves who needs to tighten their budget and want to secure their dependents at the time of any misfortunes or serious accident like death. Annual renewable term insurance policies can be of several types. Some have a fixed premium rate for a given period of time and others are renewable in nature. Renewable in nature means, the premiums are periodically adjusted based on certain criteria as laid by the company. But normally, the annual renewable term insurance policies automatically renewed on yearly basis and as the age goes up, the cost of premium gradually climb up. Because the chances of dying increases statistically, as one becomes older and the premiums also rise up each year accordingly. But in comparison to other permanent policies, it is a less expensive policy, if purchased for a short term and used for temporary purpose.

Renewable term insurance policy:

The term life insurance policy which can be renewed, based on the term of the policy, is termed as renewable term life insurance policy. They are comparatively less expensive. Like other permanent policies, these renewable term life insurance policies do not make any equity.

After the stipulated term ends, one can renew his term of policy with this renewable term insurance. This works almost the same way as of any annual renewable insurance policy but for a longer period of time. Normally it involves a greater financial risk for the insurance company, that is why renewable term life insurance policy charge a bit more than any annual renewable policies. Although the terms and conditions differ from company to company.

Level premium term insurance policy:

This is another type of term life insurance policy for which the premiums remain the same throughout the term period. During the initial period of the policy, one normally has to pay higher amount of premium. The premium tends to be lower towards the end of its life.

This policy is termed as term life insurance, because it provides coverage only for a limited period of time. So, while opting for level premium term insurance policy, one should seriously look at the length of coverage according to his needs. Sometimes the company sets a new premium level, which needs to be paid during the rest of the policy's life. The insurance companies usually try to maintain the cost of premiums in the same rate, by charging an average of the premiums. So, the major benefit of this particular policy type is that the premium remains the same throughout the coverage period.

But if one decides to change his policy in the initial period, he may incur loss by paying more, as during the initial periods, the level term remains most expensive in nature.

Convertible life insurance policy:

People normally opt for convertible term insurance policy to convert the existing term insurance policy into some other types of insurance policies. It is basically beneficial to them who bear children, mortgage, or other substantial expenses. To meet his temporary needs, one normally opts for this convertible term life insurance policy.

Decreasing term insurance policy:

Decreasing term insurance policy is particularly used to cover items of decreasing cost with respect to time, such as home mortgage. With decreasing term insurance policy, the cash benefits generally decrease each year and the premiums remain level for rest of the term. During the policy period, if the insured person dies, the pre-assigned financial institution will get the assigned amount. In this case, the amount of the sum assured normally cover the amount of the provided loan or mortgage.

Effects on termination of the term

The ending time of any term life insurance policy depends on the type of insurance policy. With renewable term, one can go for another term policy without going through new application or medical examination. While with standard term, the insurance coverage stops, and one has to apply again, including going through medical examination. With the convertible term, one normally holds back the right to convert his term policy to another type of policy.

The Benefits of Term Life Insurance

Some of the advantages of buying term life insurance are:

It is not very expensive, in comparison to whole life insurance policies. For example, a life insurance policy can cost thousands of dollars a year, whereas the term life insurance policy costs mere hundred dollars a year. Not only this, term life insurance policy is easier to conceptualize and one only needs to pay a low monthly premium depending upon the term length and amount of coverage he chooses.

Term life insurance can be a good option for short term needs.

Tips by experts

One can buy many term life insurance policies according to his needs, as it is more or less affordable.

While going for a particular type of policy, one should always be careful enough to verify the terms of the policy to make it clear that his dependents, including his spouse are covered according to his needs in the policy.

The best time to choose any term life insurance policy is when any body is having a very good health condition.

Portability or accessibility

Term life insurance policy can change its nature over time, although normally the premiums do not raise above a standard limit as defined in the policy.

Term Life Insurance with Return of Premium (ROP)

This is one particular form of term life insurance policy with Return of Premium (ROP), which provides a partial or complete return of full premium value, if the insured person becomes alive up to the end of the term period. But if the insured person dies before the stipulated term period, the death benefit will be given without any return of premium.

No exam. Protection

If one opts for any term life insurance policy, he does not require to sit for any exam., where various health related questions are asked to answer. Since term life insurance policy has no exam protection scheme. This no exam. coverage is normally provided for a period of 10,15, 20, or 30 yrs., depending upon the applicant's age, health and amount. The premiums for “term life insurance no exam policies” are higher than premiums for any guaranteed term life insurance policy.

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