TERM LIFE INSURANCE

Term life insurance and Pure life insurance are the same types of life insurance. Term life insurance guarantees payment of a stated death benefit if the insured person dies during a specified period of the term. Once the term insurance expires, the insured or policyholder can either renew their insurance for another term, convert the policy to permanent coverage, or allow the term life insurance policy to terminate.

KEY TAKEAWAYS

TERM INSURANCE

Term life insurance guarantees payment of a stated death benefit to the insured person or beneficiaries if the policyholder person dies during a specified period of the term.

These policies have no cash or refund value other than the guaranteed death benefit and feature no savings component as found in other life insurance products. 

Term life insurance premiums are based on insured age, health and life expectancy, and income.

When we buy a term life insurance policy, the insurance company determines the premiums based on the value of the insurance policy (sum insured) as well as insured age, gender, income, and health. In some term insurance cases, a medical exam may be required. All insurance companies may also inquire about our driving record, smoking status, occupation, hobbies, current medications, and family history.

If an insured person dies during the term of the insurance policy, the insurance company/insurer will pay the face value of the policy to the insured person nominee. the claimed amount, which is, in most cases, not taxable, may be used by the insured nominee to settle insured healthcare expenses and funeral costs, consumer debt, or mortgage debt among other things.

If the policy expires before the death, there is no payout or cash benefits. You may be able to renew the term life insurance policy at its expiration, but the premiums will be recalculated for your age at the time of renewal of insurance. Term life insurance policies have no cash value other than the guaranteed death benefit. There is no savings component in term life insurance products.

Because term life insurance offers a benefit for a restricted time and provides only death benefits, term life insurance is usually the least costly than other life insurance. A healthy person which age is 35 years old and a non-smoker can typically obtain a 20 years term level-premium policy, with a $ 200000 face value for $15 to $ 20 per month.

Purchasing a whole life equivalent would have significantly higher premiums, possibly $150 to $200 per month. Because most term policies expire before paying a death benefit, the overall risk to the insurer is lower than that of a permanent life insurance policy. 

Level term, or level-premium, policies

These types of term insurance policies coverage for a specified period ranging from 10 to 30 years. Both the premium and death benefits are fixed. Because actuaries must account for the increasing costs of insurance over the life of the insurance policy’s effectiveness, the premium is comparatively higher than the yearly renewable term life insurance policy.

Yearly Renewable Term (YRT) Policies

YRT Yearly Renewable Term insurance policies have no specified term of insurance, but can be renewed each year without providing evidence of insurability. The premiums of insurance change from year to year, as the policyholder person ages, the premium increase. 

Decreasing Term Policies

It has a death benefit that declines each year, according to a predetermined schedule. The insured pays a level premium, fixed for the duration of the policy.

Benefits of Term Life Insurance

Term life insurance is attractive to parents with children. Parents may obtain a large amount of coverage for a reasonably low cost. Upon the death of the father and mother, the significant benefit can replace lost income. Term life insurance policies are also well-suited for people who temporarily need specific amounts of life insurance. 

Term life insurance policyholders will not have their money returned once a term life insurance policy expires. 

Drawbacks

A variety of factors will change those insurance prices, of course. For example, a larger death of insured or longer length of coverage will certainly increase the premiums of insurance. Also, most insurance policies required a medical test, so any health issue could raise your insurance price above the norm as well.

Because term life insurance eventually expires, you can find yourself having spent all that money for no purpose other than your peace of mind. Also, you can not use your investment of savings in term life insurance to build wealth or save on taxes. 

Difference between term life & whole life insurance?

Two of the oldest types of life insurance, term and whole life, remain among the most famous types. 

  1. Term life is PURE Life insurance, whereas whole life adds a cash value that you can tap during your whole life.
  2. Term life insurance coverage only protects you for a limited number of years, while whole life insurance protects you with lifelong if you can keep up with the insurance premium payments.

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