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Is term life insurance policy the right choice?

Wednesday, March 13th, 2013

Most people don’t go and buy a life insurance policy just like that; they look for options. Well, this is the right way to go about because, the 1st step in buying an insurance policy is to decide on the sort of policy that suits both your coverage needs and also easy on your wallet.

In general, insurance policies are broadly divided into 2 groups; whole life policies and term life policies. Though both these policies cover life and pay up the sum assured in case of death or permanent disability, they have different terms and conditions. So, it is important to understand the advantages and disadvantages of both these covers before deciding. This write-up deals with overview of the term policy.

Term-exactly as the word means, it is a policy that is offered for a fixed term of period; 5, 10, 15, 20 and 30 years. It is basically the policy seekers decision to decide the term which best suits them. The policy ends after the term ends. And there is no coverage after this period, unless and until the person chooses to renew the policy. However, the premium amount one pays after renewal will increase based on the current scenario and risk factor. This policy pays up the sum assured to the nominee or the beneficiary only in case of the death or permanent disability of the insured. Precisely, in case no death or disability occurs, there is no pay up, whatsoever.

One of the main reasons why the term life insurance policy is sort after than the whole life insurance policy is because of the lower level of premiums. As no amount is invested to give returns the entire premium paid by the insured goes towards the coverage fund. Permanent life insurance policy for the same sum assured has a premium, which is more than double the time that of the term life insurance policy because, the insurance company is liable to pay the sum assured and the returns (cash value) to the beneficiary or the insured at the end of the policy. One more factor on which the premium depends upon is the duration of the policy. In case the term is less; say for example 10 years, the premium amount paid is comparatively less for the same person for a policy of term 20 years. One of the disadvantages that people consider before taking up term insurance policies is that lack of cash value hence, a liability. However, this cannot be considered as a liability because, the premium paid a very low and a lot of premium amount is paid as against permanent life insurance policy. Moreover, this is an insurance policy and not an investment option in the true sense.

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September 19th, 2014

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November 11th, 2013

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July 24th, 2013

Life Term Insurance – The Knight in Shining Armor

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