UNDERSTANDING TERM INSURANCE

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Term insurance is a life term insurance policy that covers a specified time or years. If the insured person dies, as long as the policy is active, the benefits are paid to the family.

A term insurance plan is for protecting your family against unforeseen circumstances by offering them financial security. If the plan completes the designated time and the insurer is still living, it grows, but no advantage is payable.

The payment method

Term insurance is paid in level premiums (monthly cost) that the insurance company charges for the benefit of the insurance policy or a single payment depending on your choice. The duration could be 20 or 30  years, depending on the agreement.

The insurance premium is based on the amount of payout agreed upon and the age of the policyholder. The company calculates premium levels based on a medical examination of the individual’s health, age and life expectancy. A family’s medical record may be useful depending on the insurance policy.

Term insurance is only payable if the policyholder dies during the plan term. However, it is renewable if it matures when the policyholder is still alive. But the new monthly premium depends on the age and health of the individual at the time. It results in a much higher premium level than the initial premium when the individual was younger and more healthy.

WHAT ARE THE DIFFERENT VARIETIES OF TERM INSURANCE?

Level term plans

With level term plan, the premium amount agreed on at the time of buying the policy does not change. It remains the same, and if the policyholder dies, the benefits of the term insurance are payable to the family or nominated benefactor of the policy.

Convertible term plan

This type of insurance plan allows an option to convert the insurance into a permanent or life insurance policy before it expires. For instance, if you sign up for the term insurance pan for 30years but after ten years you want to change that into a permanent insurance plan, it is allowed. A convertible term plan is advantageous in that during renewal into a permanent plan; the company doesn’t make any health considerations.

Increasing term plan

In the increasing term plan, the insurer allows you to increase the sum assured at an annual frequency during the term insurance plan hence increasing the death benefit. The premium amount then increases. This plan is beneficial in that; it allows you to pay lower premiums during the younger age when you have more bills and expenses to cover and also you don’t have to qualify for another insurance policy at an older age.

Decreasing term plan

With this term insurance plan, the amount insured decreases annually to go with the decreasing insurance needs of the policyholder. It is most convenient when you have a mortgage loan, as the loan decreases, so do the term insurance decrease. The meaning behind this is that you don’t need colossal life insurance if you have a less mortgage loan.

Annual renewable term plan

The term insurance plan is renewable annually but at a higher premium since the policyholder is a year older. It is advantageous in that the company approves the plan each year, but the costs increase as well.

conclusion

Term insurance is beneficial as financial security for a specific period and advantageous in that the term plan is renewable depending on the insurance company.

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