A term life insurance policy pays for a stated death benefit if the insured one dies during the policy period which can range from one to thirty years. As the term expires, the insured person is at no compulsion to continue the policy. In fact, he/she can convert the policy to a whole life coverage or terminate giving any further payments altogether.
If you are considering purchasing life insurance but not sure how to go about it, then it’s a wise thing to evaluate the most frequently asked questions about life insurance. And these are –
Which of the following best describes term life insurance?
- The insured is protected for his/her lifetime
- The insured has to pay the premium for a certain number of years
- The insured has to pay the premium until his/her death
- The monthly interest is provided to the insured on the value of the policy
The answer is option B, even though people often misunderstand it with option A.
Term Life Insurance is for a fixed duration
Term life insurance policies allow you to fix a certain amount of years that you want the insurance coverage for. This can range from one to thirty years and thus gives you the freedom to choose according to your requirements. As you may agree that some phases of your life have significantly more events going on, and you are faced with more important life decisions, this policy provides you with the choice as to when you want to be covered by insurance. And more importantly, it is way more cost-effective than the whole life insurance that people confuse it with. Term life insurance is also called pure life insurance.
Term life insurance is a great option for the most important phases of your life
If you are going through the important years of your life when you need to take big life decisions, then considering a term life insurance policy can be a great idea. Especially, if you are about to get married, start a family, face challenges in your professional career, or expect dangers from unknown sources, having a term life insurance policy will protect you and your close ones during this period. This is the best-suited policy as it gives you the opportunity to continue or terminate giving payments after the period is over.
Term life insurance vs. Whole life insurance
- Term life insurance is cheaper in terms of its initial cost.
- Despite the cheap cost, term life insurance provides similar benefits.
- Whole life insurance covers you for the whole life while term life insurance policy covers you for one to thirty years
- Term life insurance allows you to continue or stop giving payments after the term length is over. Whereas you will have to pay for the whole life for whole life insurance
- The cost of whole life insurance may increase over time which is unlikely for term life insurance
- Term life insurance doesn’t offer a savings account like whole life insurance that will accumulate money for you over time.
- Term life insurance premiums consider age, life expectancy, and the current health condition of a person.