Are you confused with term life insurance definition? Don’t as you will get your answers here.
Term Life Insurance Definition
The term life policy provides simple coverage such as death or permanent total disability for a specific period. The total sum assured will be paid to the beneficiary in the event of such incidents. Normally the premium can be paid yearly or just one lump sum. Should the insured default on payment, the coverage will cease. No payment, no coverage!
The term life insurance is the least expensive types of life insurance. For such policy, no cash value will be generated as the premium is low. Hence, it is on a pay and get protection basis. Without payment, no coverage will be provided.
The Different Types of Insurance
To further on our discussion on term life insurance definition, we will look into three different types of such insurance.
1. Decreasing Term Insurance
For those with a mortgage, you may be familiar with this policy; in fact, you may be buying such policy as required by your financial institutions.read post here!
Under such policy, the sum insured will decrease over time just as the loan value. This policy will ensure full payment to the bank for the loan owed should anything unwanted happens to the borrower.
2. Level Term
For such coverage, the sum assured will stay the same throughout the entire period, and this is probably the most common types of term insurance. The most common purchase period ranges from 5 to 20 years depending on each’s needs.
3. Annual Renewable
This is a yearly renewable policy, and normally the premium will increase with each renewal. The starting premium may be very low to accommodate the needs of the insured and increase over time as the perceived income of the insured will multiply. This type of insurance is most suitable for those who just start work and can’t afford to pay a high premium. As their experience and income improve over time, so does the premium.visit the site http://www.smh.com.au/business/life-insurance-commissions-should-be-buried-20151109-gkukbx.html
The Different Advantages
There are many pros for all the different types of insurance mentioned above. For example, the decreasing term is important to ensure full loan payment should anything happens to the borrower. In the meantime, the level term can provide food and shelter to the family members should any tragedy happens to the person under coverage. The low entry fee for such policy also means that those with lower financial capability can afford to have an umbrella of protection for their spouse and children.
Another benefit of the term insurance is the ability to be converted to whole life insurance. For some term policies, such flexibility is provided, and the person under coverage can convert to permanent life policies when one is financially capable. In this aspect, the term policy plays an important role in providing protection and yet provides options for conversion to whole life policy when the person is financially sound.
Insurance is important to safeguard our financial assets should anything happens. Most people think they do not need it until it is too late. Never falls into that trap! With all the term life insurance definition here, you already know your options and go ahead to choose the best term insurance that suits your needs.