term life insurance

The insurance needs of individuals are unique. Individuals with short-term insurance needs opt for term life insurance policies. Term life insurance policies are extremely affordable and have lower initial premiums in comparison to whole life insurance.

Such kinds of life insurance policies are popular among people who have a short-term requirement and endeavor to secure the financial future of their dependants for the duration that the risk exists. Since they are affordable, with low initial premiums, the lifestyle of the insured and his family is not compromised while making the payments.

One major downside is that in later years the premium become costlier and can be greater than the premium cost of whole life insurance policies. Term life insurance is completely protection-oriented. The beneficiary obtains the death benefit only in the event of the death of the insured within the specified time period. If the insured lives past the term period, not a single dime is given. There is absolutely no ingrained cash value or investment character in term life insurance policies. In case of an inability to pay premiums, or outright cancellation, the insurance policy becomes useless.

There are basically two variation of term life insurance; namely, level term and annual renewable term (increasing premium) policies. Level term insurance policies have a more expensive initial premium in comparison to annual renewable term. Generally, after 5 years, the premiums are maintained at a cost-effective standard level. Purchasing a level term insurance for a longer duration (more than 10) is the best option in most cases. Annual renewable term insurance is like a pure term life insurance, apart from the fact that the premium rates keep increasing with each year of renewal. There is also another variation of term life where the initial premiums are high and they keep decreasing until the end of the term. Certain companies buy group term policies for their employees. However, these policies are only for the work period of the employees.

Many insurance companies provide the option of renewing or converting a term policy into whole life or universal policy, after the expiration of the term. However, both renewal and conversion premiums are often much higher. Certain companies require a repeat health examination during renewal, which may become grounds for refusing to provide insurance. Term life insurance, like any other insurance policy, has its own set of pros and cons. A policy should always be bought depending on its suitability to individual needs, and with due caution.