Term Life Insurance: Pros And Cons
Any adult who is working to provide for dependants must purchase life insurance to
protect their dependants in the event of the insurer's sudden demise. When it comes to purchasing life insurance policies, many people opt for term life insurance over permanent life insurance. This, in spite of the fact that permanent life insurance attracts cash value and does not require renewals. What makes term life insurance so popular?What is term life insurance? In this type of insurance, the insurer is insured for a particular period of time. In case of death, a pre-determined amount is paid to beneficiaries. The premiums paid by the insurer are used to cover the cost of insurance coverage.
Features of term life insurance policy:
1.Insurance cover for a specific period (like 5, 10, 20 years and so on)
2. Less expensive
3.Renewable
4.No cash value
Since term life insurance is less expensive, it is ideally suited for families that are on a budget. Why are these policies less expensive? Because the short term of the policy keeps the risk minimal as far as insurance companies are concerned. This lowered risk translates into low premiums for the insurer. Those people who enjoy good health and have a healthy lifestyle need pay very low premiums. The limited term feature also makes term insurance an excellent choice for those with temporary insurance needs.
Term life insurance policies have many features that are designed to suit people with limited financial freedom. For instance, by choosing yearly increments in premium, the insurer can enjoy the benefit of low premiums at the beginning. The insurer also has the option of paying premiums on a monthly, quarterly, half yearly or annual basis. Term life insurance polices also allow the insurer to insure more than one person under the same policy. This further brings down the cost of life insurance for the family.
Some term life insurance policies have an option that allows you to choose a waiver of premium. This is very useful for people who are unable to pay their premiums due to certain life circumstances (like an accident).
As you age and your financial independence grows, it is advisable to supplement your permanent life insurance policy with suitable term insurance policies. This is a great way of providing protection to your family at times when your financial obligations are large (for instance, when you have taken a large mortgage on a home).
The only real risk of term life insurance is the expiry date. If insurers do not follow up the status of their policies, they may be left without coverage when they need it the most. Fortunately, there are some term life insurance policies that renew automatically.
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