Buying life insurance-both life and general can be tricky. The wide range of policies available in the life insurance sector creates confusion in the mind of the buyer. Some of the different types of life insurance policies and varying terms available are term life, whole life, variable life, cash value, and many more. With the coming up international insurance companies both in general and life insurance sector, the scope for selection has increased manifold. One of the most common life insurance policies is the Term life insurance.
A quick breakdown here will give you detail of both- good and bad of this type of insurance policy.
What is term life insurance?
Term life insurance means exactly the way it sounds. In this type of policy you have to purchase life insurance for a particular term period and the premium amount is fixed for that specific period. The policy holder has to pay the premium for the stipulated period or the entire term according to the conditions in the policy. In this policy you do not get anything in return and the premium is paid only to continue your risk cover. Hence, when the term has ended you do not need to pay any premium and the policy automatically expires. People who are not capable of paying huge premiums but still want to secure their family prefer such policies as they are comparatively cheaper. Term life insurance has several categories such as level term, decreasing term and annual renewable term.
Highlights of Term life insurance
These policies are cheaper than other policies such as universal, whole or variable. It has life coverage for specific period –generally in terms of 30, 25, 20, 15 or 10 years. Depending upon your age and requirement for life coverage you can select term of your choice. On the choice of the term, the cost of premium is calculated. Longer the term, lesser is the premium. On the other hand, the premium also depends upon the sum assured. Such policies are generally taken while applying for home loans or long term loans as security measure.