Benefits of Term Life Insurance
A Insurance Article Contributed by Deepak Cutting
Why Term Life Insurance
Life insurance is a way to provide for unforeseen death. As people settle down in their careers and start a family, they plan their future. To fulfill these plans, a large amount of cash may be required at definite periods of their lives. It could be building/buying a house, sending their children to collage, starting a business or similar needs that require large funds. It will be impossible to come by the requisite money in the unfortunate event of death of the breadwinner of the family.
As such, there is need to invest in term life insurance and provide for this eventuality. The person can never be replaced but the tax-free funds made available by virtue of the life insurance policy can be used to cater to the needs of the survivors, in the unfortunate event of death of the policyholder.
Term life insurance is designed to supplement family income in the event of death of the policyholder till such time other family members (e.g. your children) get ready to take care of themselves. The premiums in this case are much lower than the whole life insurance, thereby making this the more affordable option.
Why is Term Life Insurance So Popular
This type of insurance contains the essentials of life insurance at an easily affordable cost. Should the policyholder die during the term, the sum assured is paid to the nominee. The option to review or increase the sum assured is available at the end of the premium guarantee period. The lower initial premium makes this type of insurance ideal for people who need insurance cover for a limited period. There is the option to renew coverage at a higher premium.
Term life insurance does not attract dividends in most cases and there is no cash value accumulation here.
Situations Where Term Life Insurance is the Preferred Option
· When requirement of protection is temporary: If a loan is taken, to be repaid over a period of time, the lender would like the life of the borrower to be secured during the time period when this loan remains outstanding. Such arrangement will secure repayment in the event of death of the borrower, when the lender is the nominee in that insurance policy.
· When available funds cannot buy permanent life insurance: If life insurance is necessary but the available cash cannot buy permanent life insurance. Term life insurance covers the risk till such time availability of funds can improve. A person at the threshold of his/her career when his income does not allow investment in whole life insurance can buy time and use the protection of term life insurance till he is able to invest in whole life insurance.
A student may have education loan to be repaid and, in the event of death, the obligation of repayment will fall on the estate of the borrower. To avoid that risk, the student may like to buy term insurance and convert that in to whole life insurance once his income level improves.
· To supplement the whole life insurance: Need for additional income in a family generally reduces with the passage of time. This need is at its maximum in the earlier years, when the children may be young and of school going ages, the family may need to pay rent for their living accommodation and such similar needs. As time passes, the need for supplementary funds in the event of death of the policyholder gets reduced. Term insurance during he earlier years is the best way to augment your whole life protection in the earlier years.
