The ABCs of Term Life Insurance

Term insurance is a pure vanilla policy, which only charges for the cost of insurance. It is the simplest of life insurance policies to comprehend and most economical to buy. This low-cost insurance policy guarantees to pay a lump sum amount to the beneficiary in the event of a death of the policyholder.

There is a fixed time period, or a pre-determined term, during which the policy is in force. This could be 10, 15, 20 or 30 years, until the policyholder attains a certain age, until a mortgage is paid off or until children’s education is completed.

It is the policyholder, who decides upon the term. He also has the liberty to pay only for the coverage he needs, for as long as he needs it.

Term Insurance also maintains long-term rate guarantee periods and premiums are at rock bottom. Premiums paid by an individual are also eligible for tax deductions under section 80C of the Income Tax Act.

There are three types of payments one can choose from, as enlisted below:

• Annual renewable term life: The policy will automatically renew every year and premiums will increase with the policyholder’s age.

• Level term insurance: The premiums and benefits remain the same throughout the term.

• Increasing/Decreasing term insurance: The premiums will remain level but the death benefits will rise/decline over time.

Term insurance also offers the following two options:

• Guaranteed Renewal, which gives the flexibility to prolong coverage beyond the initial rate-guarantee period without a medical exam and other evidence of insurability. This is an extremely important feature, should a person become ill and uninsurable.

• Guaranteed Convertible, which offers the liberty to convert the coverage to a cash value policy that the company may offer at current rates without having the need to take a physical exam. This may be useful as a person ages, should he decide upon a cash value life insurance.

rnTerm insurance can be done through the usual insurance agents or even online!

When an individual opts for an online term insurance, he may avail hefty discounts. This is because an online term insurance cuts the insurer’s operational costs. It also gives the prospective policyholder the additional time to skim through the offers and add-on services offered by different companies dealing in term insurance, all at the click of a mouse button.

To conclude, whether a person opts for term insurance online or offline, he not only insures his life but also assures his family that he cares about their future.