Understanding Term Insurance: A Guide to Various Benefits and Features

Understanding Term Insurance: A Guide to Various Benefits and Features

Understanding Term Insurance: A Guide to Various Benefits and Features

It is a life insurance policy which is not for the whole life of an individual but for a certain period. The individual must pay a specified sum of money for a certain time. After the term insurance matures, the individual gets the whole amount and additional payment. In case the holder dies during the policy term of the insurance, then the whole death amount is paid to the family members.

4 Different Kinds of Term Life Insurance

There are different kinds of term life insurance available. Details are given below:

Increasing Term

Understanding Term Insurance:  In this term insurance variant, individuals can increase their death benefit after giving higher amounts as premiums. This will allow policyholders to pay a lesser amount in the initial stages and increase the premium gradually. In this way, policyholders will not need to take additional policies in their old age.

Convertible Term

Understanding Term Insurance: Convertible term insurances are those with a few years remaining until their expiry and can be converted to whole life insurance. Here, the policyholders do not have to appear for additional medical exams to qualify for these term insurances.

Increasing Term

Understanding Term Insurance: Increasing term insurances give higher death benefits with time in exchange for higher premiums. These insurance companies charge lower premiums in the initial stages and higher premiums as time goes on.

Decreasing Term

Understanding Term Insurance: Decreasing term insurance policies is the complete opposite of increasing term insurance. Here, the death benefit reduces with time. However, unlike increasing term life insurance, the policyholders have to pay a constant amount throughout the policy term irrespective of the amount they get as a death benefit.

4 Key Features of Term Insurance

Some of the main features of term insurance include the following:

• Term insurance works as a life insurance but is less expensive than the majority of these insurances. Here, the individual does not need to take insurance for his whole life to get an assured sum of money.
• There are different kinds of term insurance available that cover different age ranges, periods, and premiums.
• There are several factors when calculating the premium for term insurance. Some of these factors include income, health and life expectancy of the individuals.
• The premium for the term life insurance is paid, but it may be paid every year or monthly after the first payment is made.

Both whole life insurance and term insurance have different purposes. Whole life insurance is more expensive than term insurance but gives prolonged life coverage. Moreover, these term insurances cannot be used for tax savings purposes. Moreover, Whole life insurance policies can be used by policyholders to get loans. The amount can be paid as an EMI or deducted from the total death benefit.

It is better to consult with a representative before deciding whether to get term insurance or whole life insurance. A professional will know how to guide individuals based on the best kind of insurance to consider different factors.

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