Better Information Retention

 

 Term Insurance

Term insurance is an insurance policy that guarantees your payments for a certain period of time. This is often contrasted to whole life or universal life insurance, which guarantee a lifetime payout. Term and whole life are the two types of policies most commonly offered by insurers in the United States.

Because term coverage usually has a set end date, it can prove to be inexpensive option for individuals who don't want to invest in something with premiums that continue indefinitely. These policies typically offer total or annual cash value payouts for death benefits; the latter will fluctuate depending on how many years you've been paying into the policy and whether you have any dependents at your time of death.

Term insurance is also a popular option for individuals who desire some level of financial security in the future. However, it is important to be aware of the limitations and restrictions you may be subject to. This article will provide you with all the information you need to understand the various term insurance policies available.

The next time you're considering purchasing a policy, consider going with a policy that pays out for five, seven or 10 years to cover your coverage needs today and even in years beyond that.

Why Term Insurance?

In many countries around the world, life insurance is mandatory for workers (especially those in large or important positions) and buying term life insurance can be one way of protecting yourself from costly care needs in old age.

For example, in Australia term insurance is compulsory and everyone must have life insurance unless they can demonstrate financial independence, for instance because they are financially independent or have no dependents. In India, this law was applicable until 1998 when a new one was introduced that allowed citizens to decide whether or not to invest in life insurance.

Term life policies are generally purchased by individuals who desire some level of security on their death benefits. As such, these policies can be extremely helpful to individuals who may not be able to afford more expensive types of coverage. However, it is important that you review all the different types of policy before deciding upon one that suits your personal needs and preferences the best.

The following is a review of some of the most common types of term life insurance policies offered by insurance companies throughout the world.

Policy Types: 10, 20, and 30 Year Terms

When it comes to deciding upon the amount of time that you want your policy to last for, most individuals will either select a 10 year or a 30 year term. On the other hand, there are some individuals who will opt for a 20 year plan. Keep in mind that there are often high premiums associated with these longer plans and therefore you must carefully assess your circumstances before making a decision about which plan you want to go with.

Technically speaking, term life policies are similar in regards to how they work. All these policies pay out a death benefit to your beneficiaries if you die while the policy is active. Even so, there are some other factors that you should be aware of when it comes to these types of plans. For example, term life insurance can be broken down into two main groups: level premium and decreasing premium plans.

Level premium plans pay out a consistent amount every year while your beneficiaries are receiving the payout until the term of the plan is fulfilled. On the other hand, if you opt for a decreasing term life insurance policy, your premiums will decrease over time as long as you keep up with your payments.

On the other hand, some term life policies will pay out either a package of cash or all of your death benefits if you die during the policy term. However, keep in mind that there is usually a charge associated with these policies and therefore you should carefully consider whether or not this is something that you can afford.

The following is a review of some of the most common types of term life insurance policies that can be purchased by individuals throughout the world.

Policy Types: Whole Life and Universal Life

Whole life and universal life are two popular term insurance types offered in almost every country throughout the world. As such, these types of policies are intended for individuals who want to hedge against their possibility of death at some point in the future. However, there are a few major differences between these types of policies and therefore it's important that you fully understand the coverage that you are signing up for.

Universal life insurance is popular because there is an attached investment component to it. These premiums can be invested in various ways but most often they will be put towards a mutual fund account.

Universal life insurance has its own advantages and disadvantages. One advantage is that your premiums remain level throughout the years while you're paying them into your universal life plan. However, when compared to whole life plans, universal coverage does have its flaws too. These flaws include the fact that it can be difficult to identify the value of your policy until a certain time has passed and compared to some of the other options, universal life coverage is fairly expensive.

Universal life insurance is a contract between an insured person and an insurance company. As such, it's important that you understand the terms of this contract before you make a decision about what type of policy you want to buy.

To help alleviate contribution risks, universal policies sometimes require low minimum investment amounts or no minimums at all in order to have universal coverage paid for by these policies. However, keep in mind that with some companies, there will be an additional fee attached to your policy if your contributions are below a certain level.

The following is a review of some of the most common types of term life insurance policies that can be purchased by individuals throughout the world.

As one might expect, whole life coverage costs more than universal coverage. However, there are two types of whole life plans known as term and permanent.

Term policies will pay out a death benefit to your beneficiaries whenever you die and these policies usually do not require any type of investment component to them. On the other hand, permanent policies will pay out a death benefit for only 10 years before you will have to be renewed. Once you're renewing the policy for another 10 year period, your policy will cease paying death benefits and it will instead become a permanent policy.

Policy Types: Mortgage Life Insurance and Jumbo Life Insurance

Mortgage life insurance is another type of term life coverage that is offered by many companies throughout the world. As the name implies, this type of policy is purchased to pay off a mortgage in the event that you die while your policy is in force. Keep in mind that most mortgage life policies will cover up to 80% of your outstanding principal on your mortgage. Therefore, if you have a remaining 20% on your mortgage, you may want a second policy to cover this amount so that your beneficiaries won't have any trouble paying it off when you die.

Jumbo life insurance is another type of term life policy that will provide an additional death benefit to your beneficiaries whenever you die. However, keep in mind that if your outstanding mortgage is above $1 million dollars, then you will be required to keep making mortgage payments in order to have jumbo insurance coverage.

Policy Types: Term and Permanent Whole Life Insurance

Whole life insurance is a type of term life policy that can be purchased by individuals throughout the world. As mentioned previously, whole life policies will pay out a death benefit for a period of 10 years. On the other hand, permanent whole life plans are policies that will cover 100% of your outstanding principal on your mortgage up until a certain date.

Conclusion

The contents of this article are for general information only and should not be construed as financial advice. The author does not accept any liability for any direct or indirect loss or damage that may arise from reliance on the information provided on this site.

By Andrew Smith | Read similar articles Georgia | UK | Arizona | Washington DC | Alaska | Indiana

1 Share 13 Shares 1 Share with your friends Submit Email ID Printable version

Don't have a PDF reader? Get Adobe Reader Plugin by klicking here Don't have a PDF reader? Get Adobe Reader Plugin by klicking here The contents of this article are for general information only and should not be construed as financial advice.