There are many types of insurance policies for an individual which pays off in the event of death. Life insurance policies are amongst the most popular ones. People buy a life insurance policy to ensure that their family and next-of-kin are financially protected upon their demise. In as far as life insurance policies are concerned, a policyholder can choose to buy a whole life or term life coverage. Each has its advantages and disadvantages. This article, however, will take a look at 7 facts about term life insurance.
Abundance in Choices of Coverage
The choices of coverage for term life policies are mind-blowing and are usually only limited by a person’s budget in spending on such a policy. As premiums are considerably much lesser compared to a whole life policy, most of the people who choose to purchase a term life policy are singles and those just starting out in the workforce. With a minimal coverage, the term life policy ensures that the next-of-kin is financially covered upon death of the policyholder.
How Long Do You Want?
The amazing thing with term life insurance is that not only do you get to choose the amount of coverage, you also get to choose how long you want the term to last. From a minimum 1 year term to policies which run for more than 30 years, the policyholder is able to adequately budget his expenses and how an estimated time by purchasing the term life policy.
Level, Increase, or Decrease Benefits
Term life insurance benefits can increase, decrease, or remain the same throughout the policy. It can also vary when circumstances change eg. when your family members increase or when your children grows older. Level term policies pay out the same benefit amount and is not affected by whichever date the policyholder perishes. On the other hand, some term life policies have benefits which increases or enhances as the policyholder grows older.
It Is More Affordable
Many policyholders who are just starting out in the workforce choose a term life insurance due to it being relatively cheaper compared to whole life insurance. With a host of other financial commitments to fulfil and a starter’s pay, it is not wonder that young people start off with a term life policy as the minimum coverage afforded for their family members.
Term Life Coverage May Have Tax Breaks
In some jurisdictions, the government encourages its citizens to purchase insurance policies by offering tax breaks. Insurance premiums paid out by the policyholder may be deductible from the taxable salary. However, if the premiums are paid by the employer, the policyholder may not be able to claim such tax breaks as the payment is made by a third party.
Renewable At Your Option
Don’t feel like renewing? Not a problem. Term life insurance runs on renewable basis and will automatically expire upon non-renewal. A policyholder may decide to change to a whole life policy instead as the circumstances of his or her life changes.
Some term life policies allow the policyholder to convert the policy at its maturity in cash-value policies. This conversion feature gives the policyholder the option to change the policy to something which will offer something in return at a later stage in the form of dividends or drawings or cash-surrender value.
As in all cases, seek a professional insurance agent for advise on which insurance policy suits you.