10.08.2012

The Meaning Of Term Life Insurance Simplified For You.

style="text-align:justify;"> As the name itself suggests, Term life insurance is for a fixed, pre-decided term. It is temporary and is valid only for a certain period of time. The agreement between the insurance buyer and the insurance company states that the customer is buying a certain amount of insurance which will be paid to the specified beneficiary upon his death. Term life is only applicable for a stipulated period of time ranging from 1 to 30 years. The premiums can be paid quarterly or yearly depending upon the buyers convenience.

The term life is a pure insurance policy that does not accrue any cash value and that is why if the insured outlives the policy, he does not get any return. Because of that and also because the policy expires without paying up most of the time, one has to pay a very low premium, and that too on monthly, quarterly or yearly basis according convenience. However, there should not be any defaulting on such premium payment or the policy will become invalid. Therefore, buy cheap term life insurance, but to get the best out of it be aware of all the technicalities of the policy before you buy it.

There are different types of term life insurance policies. The simplest and the cheapest is the one that is valid for one year only. You can buy a new policy at the end of the year if you believe you still need the coverage. However, as the life insurance rates increase with age you may find them unviable after some years. At the same time, if your health deteriorates, the carriers may refuse to insure you. To counter that, you can have a compulsory renewability clause added to your policy at the time of purchase Otherwise, you can also buy your policy at level rate for a period of 5/10/15/20/25/30 years. Level term life insurance policies are the cheapest policies as far as long-term life insurance needs are concerned.

There are many variant of level term life insurance policies. One is Return of Premium policy or ROP. If you are so piqued about paying for so long and then getting nothing out of it, you can go for such a policy. These too are term life policies valid for a specific period and they too do not accrue any cash value. Nevertheless, these policies return all the money you will pay as premiums if they lie unutilized at the end of the term, which in simpler term means, you will get back your money if you do not die within the set period.

This is to ensure that the premiums remain stable during the term of the policy. Return of premium policies can be bought in 15-30 year terms. The biggest upside of this variant of term life insurance is that they cost substantially less than the permanent life insurance policies but have similar benefits. They both gain in cash value as the years pass and during the lifetime of the insured person.

There are different types of permanent policies too. Among them, the whole life insurance and universal life insurance policies are very popular among the ordinary people. Many people buy them in spite of their higher rates because they not only provide a forced savings, but also tax relief for the policyholder. The ROP being a term life does not provide any such benefit, but simply costs more. Life insurance no exam is also another high priced term life policy that provides no other benefit except instant coverage.

Usually the life insurance policies are fully underwritten which means that the policy buyer has to undertake a medical examination. However there is an option of no exam term life insurance too for those who dont wish to undergo such an examination. When you buy a no exam policies then you dont have to go through a physical exam. Insurance companies base the insurance charges or premium rates based on this physical test. Those who are physically fit and have no medical history have to pay lower premiums as you have a longer life expectancy. Physically unfit people are charged more as they are expected to live for lesser number of years





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