The concept of term insurance is also known as the specific type of life insurance and can be termed as an insurance type which will help in granting the payment of a stated amount of death benefit which is covered in case the person who has been covered if dies during the whole term which has been specified in the policy. At the expiry of term, the policyholder can even renew the policy for another term or can convert it into for permanent coverage or can terminate the policy.
Following are some of the features provided by term insurance policies:
They help to provide temporary coverage
The best term insurance offers coverage for a limited period which ranges from approximately 10 years – 30 years. The term policy eventually will expire, and this can be both positive as well as a negative feature which depends upon the circumstances of the individual. Another benefit associated with this is that temporary coverage will allow lower premiums and on the other hand once the policy expires it can be difficult to secure an extension because of the worsening health conditions of the individuals. So, if one can accurately predict the length of time for which one needs coverage that this is the best and most economical option for them.
It helps to provide pure death benefit
The permanent forms of insurance come with savings as well as investment components which may or may not be suitable for all people depending upon the needs. The term life insurance comes with no such component and all those people who are interested in buying this can very easily go with this option. The main aim of the policy is to provide a lump-sum payment upon the death of the policy owner. This benefit can even be used to pay for the funeral as well as medical costs. It can also be used for the replacing of lost income. In case an individual wants to grow wealth in the life insurance policies then he or she must go with the option of the permanent type.
It requires no capital build-up
The term insurance does not accumulate wealth over time as a whole policy would. Just like the car insurance the term life premium goes directly towards securing the compensation in case something occurs. Once the individual stops making the payments of the premium then, the policy matures and reaches the end of its term and the individual is left with zero capital. The premiums are used with the sole motive to fund the death benefit in case no death occurs then the insurance company will never be out. So, it can be referred to as the direct cost of insuring against the risk of death.
It helps to provide a fixed system
The term insurance can also be purchased with various death benefits which range from low to high amounts. The amount of coverage which has been decided directly will affect the size of the annual premium which the insurance company will charge from the policyholder. One downside of these policies is that the amount is set and it cannot be increased or decreased. So, if an individual accurately estimates the right level of coverage for the length of coverage for the term of the policy then it is a good option. But the thing is the financial situation of the people changes many times for 30 years. So, in case if anybody wants a flexible option then one can go with various other available options.
The feature of premiums being increased
In most of the policies the premiums increase after every few years. This result will bring from the rising risk of death as the policyholder will age. Fundamentally all the insurance faces the grim reality of increasing mortality charges. The permanent life insurance every day is out later premiums with former ones which enable the owners to fund their policies with uniform annual payments. In case the premium level is important for an individual then one can go with the option of considering other options but in case one needs only temporary coverage that this is the best possible option for him or her.
The feature of medical examination
All sorts of policies require the policyholders to undergo a proper medical examination so that policy can be issued. This exam is performed by the paramedical that has been hired by the insurance company. The paramedical will come to the home of the policyholder to conduct the medical examination and will take various kinds of physical measurements like weight and height, will take a blood sample and urine sample for the analysis part and will ask various associated questions with a medical history of the person and the hereditary conditions which can pose a person into a greater risk of death. Based upon the results of the test then insured will be given a rating class which will decide the higher or lower amount of premium.
The feature of tax-free inheritance
This is the greatest benefit of all insurance lives that they help to pass on the wealth tax-free and also avoid estate taxes. Among all the other investment vehicles this is the best option because it provides several tax benefits. Beneficiaries are not required to pay any kind of tax on the funds which come to them with the help of life insurance death benefit.
The right choice has to be made by the individual depending upon his or her needs. The individuals must consider the cost of the premium charged by the company at the time of undertaking any such policy. The affordability factor is a major factor to be considered at this point. The availability of coverage should also be considered. Investment value is another point which has to be paid proper attention at this point. Some of the plans pay dividends and some of the plans provide proper cash value growth which will help insufficiently paying the premiums on that policy. All the tax benefits have to be considered and one must always move into such options with the help of proper advice from the financial advisors.
Hence term life insurance is a good option to invest funds into so that several benefits can be availed.