Term life insurance is also known as term insurance. This type of insurance offers protection and coverage for a mutually agreed period at fixed premium rates. If the insured person dies when the coverage is in operation, the beneficiary named in the term life insurance policy would get the death benefit to the extent of the amount insured. However, the coverage would not be valid after the expiry of the agreed period.
Term life insurance is preferred as a short-term protection since the premium rates are very low, compared to permanent life insurance. Further, you could decide whether you wish to pay the premiums on a monthly, quarterly, half-yearly or yearly basis. The term life insurance could be availed even for a single year but normally the periods that majority of people prefer are 5, 10, 15, 20, 25, and 30 years.
This type of term life insurance is available with fixed premium rates for the entire period or increase of premium rates at mutually agreed periods, such as every year, every five years, etc. Term life insurance is mainly useful for persons who find permanent life insurance quite costly but desire to fulfill short-term needs. Many term life insurance policies have the option of converting them to permanent life insurance, subject to certain conditions.
Industry statistics reveal that the actual payout claims for death under term insurance policy is quite low, only around 1% of the policies paying the death benefit. Hence, insurance companies keep the premium rate for term insurance policies as inexpensive and affordable to even people with low income.
If you are young or in the middle age, the best option for you is to purchase a term insurance policy in place of a permanent insurance policy. The difference in the premium rates between the two would be substantial. You could invest this difference amount in other lucrative investment opportunities. Thus, you would be providing protection to your family in case of unexpected death during the period of the term insurance policy and would also be accumulating wealth through prudent investments.
This ‘buy term insurance and invest the difference amount’ concept is gaining wide popularity among people who wish to have a sound financial plan for their future and future of their families. Still, you should consult a qualified and experienced insurance consultant before you decide whether term insurance is suitable to you, how much coverage you should obtain, and how to invest excess amount for maximum profits.
