INSURANCE

Everyone needs a financial security to protect his family from a crisis. For this reason, there are a wide range of insurance plans available in the market. The two types are the Temporary Term Insurance and Permanent Life Insurance policies. Each policy has its own objective and purpose. Therefore, an individual needs to know his requirement first and then go for purchasing a policy. However, if they want to pay the minimum and get a good coverage then they can settle down with a term life insurance policy.

Term life insurance –what is it?

As the name suggests, a term insurance offers coverage for a specific period of time (the “term”). The “term” will vary from individual to individual. Term life insurance is usually preferred to other insurance policies as the money involved in buying such an insurance plan is very less. A person can purchase any of the five term life insurance policies offered by the insurance company.

Term life insurance –how different is it from a permanent life insurance?

In a permanent life insurance policy, a person needs to pay more in premiums than the actual insurance coverage. In term life insurance policies, the premiums are much lower. While the permanent life insurance plan covers a person till he dies, the best term life insurance do not guarantee any coverage till the policy holders’ death. So, one must estimate his needs before choosing between the two.

Term life insurance –what are the types?

There are different types of term life insurance plans. A person can renew his policy every year. This is called annual renewable term life insurance which, generally, lasts for 65 years. According to this plan, the policy gets automatically renewed at the end of every year.

A person can also go for the renewable term insurance plan. If a term is of 5 years, then this policy gets automatically renewed at the end of every 5 years. As the conditions for this policy involve greater financial risk, the cost of it is also on the higher side.

One of the most commonly purchased term life insurance plan is the level premium term insurance policy. The person holding this policy needs to pay the same amount of premium in each term. This way the insurance policy holder can start with paying a relatively big amount of premium and continue paying the same amount at the end of each term. The advantage of this is felt in the later days of the policy as the amounts of the premium do not change.

If a person wants to pay lesser he can go for the decreasing term insurance plan. The cash benefits in this policy keep decreasing every year. This way the policy holder can pay a little more in the initial days, but end up paying less in the later days.

The fifth type of term life insurance plan is the convertible term insurance. The policy holder can change his term insurance policy into the annual renewable, renewable, level premium or decreasing term insurance plan. As the risk involved in this policy is more, the cost of this policy is also on the higher side.

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