Everything You Need To Know About Term Life Insurance – Explained Simply!

You Need to Know About Term Life Insurance Here, we provide all the answers in an easily understandable format.

We will cover the basics of term life insurance: its definition, types available to consumers and selecting one to suit their individual needs; along with why having proper protection in place is so essential.

You Need to Know About Term Life Insurance

1) Types Of Term Life Insurance Policies

A term life insurance policy is an agreement between you and an insurance company, whereby the policy holder (you) are insured against death in exchange for paying an annual premium, which in return allows the insurer to offer death benefit coverage should any policy holder dies prematurely.

Types of term life insurance policies
Types of term life insurance policies

Term life insurance policies are single-death policies with an identical death benefit each month for their entire term, while one of the key distinctions is in length of policy – annual renewable term life and whole life are two popular examples.

Annual Renewable Term Life Insurance

Annual renewable term life insurance policies are the most prevalent form of term life coverage and tend to function more like health insurance than traditional life policies.

At the end of every year, policy holders have the option to renew their coverage by renewing it for another year if desired. Annual renewable term life insurance policies come with 10-year, 20-year and 30-year durations available.

Whole Life Insurance

Whole life insurance policies operate like long-term policies in that policy holders typically pay the same monthly premium for its duration. They tend to be more costly than annual renewable term life policies.

Yet whole life insurance policies offer distinct advantages: their premiums remain constant during their term and they offer cash value accumulation that can act like an investment opportunity.

2) How To Choose The Right Policy

Considerations when selecting an ideal life insurance policy include age, health and financial situations. Below is a table which highlights these considerations as well as advice for selecting a term life policy.

How to choose the right policy
How to choose the right policy

Financial advisors generally suggest that your life insurance cover should equal at least 10 to 15 times of your annual income, although you should take other factors into account when estimating this ideal figure. If you have debts to service in the form of Equated Monthly Instalments (EMIs), keeping up with payments might prove challenging in your absence.

3) Why Is Term Life Insurance Important?

Term life insurance can serve multiple functions. First, it can protect your family financially in the event of your death by filling any gaps between what would come from your will and the amount they need to sustain their lives posthumously. Term life policies offer low-cost solutions to this dilemma.

Why is term life insurance important
Why is term life insurance important?

Second, term life insurance offers emotional protection to your loved ones. Depending on the type of death benefits that are chosen by you and your policyholders, families can continue living together in the same house, driving their same vehicle and sending their kids to school together.

4) What Are The Benefits Of Term Life Insurance?

Cover for Your DependentsTerm life insurance is designed to offer financial protection in the event of your death. A death benefit can help cover living expenses, medical costs and any outstanding debts for which your family would otherwise need help paying. Whole life policies also build cash value over time – an added perk which shows your hard earned dollars at work! Finally, term life policies offer affordable protection that can keep your loved ones protected financially after you pass.

What are the benefits of term life insurance?
What are the benefits of term life insurance?

No medical exam is necessary when applying for term life insurance policies, unlike with long-term policies which often ask you for a physical. There are no health questions asked of policyholders compared to long-term policies which do. Furthermore, when getting term life policies there’s no proof of good health needed compared to when purchasing long-term policies.

5) How Much Does Term Life Insurance Cost?

Price of term life insurance policies depend on various factors, including age, health and financial situation. Online tools and calculators can give an approximate idea of how much term life coverage would cost; but keep in mind they may not always provide an accurate depiction.

You Need to Know About Term Life Insurance
How much does term life insurance cost? image credit

Estimates are only intended as general guides of what an insurance policy could cost; you should remember that its price could differ when purchasing one as insurance companies will analyze your health information to ensure you meet their standards before charging more if applicable.

Also Read- A Comprehensive Guide To Different Types Of Insurance And How It Can Benefit You