Term Life Insurance
(Term Life Insurance is also known by its older name, Death Benefits Insurance.)
Term Life Insurance is a policy which runs for an agreed number of years. When the policy holder dies, a lump sum is paid out to the named beneficiary.
Advantages of Term Life Insurance
Term Insurance policies offer unique flexibility to those seeking life insurance to cover any period of time. The word, ”term,” indicates it runs for the time specified in the contract. Term life insurance may cover a few years or as many as 50, the main difference being seen in the monthly payments, since the risk of a claim becomes higher, the longer a policy remains in force.
When a shorter period of cover is needed, for example, to insure the time before dependants are able to access funds held in immature investments or pension funds, term insurance brides the gap by eliminating any risk of a financial shortfall.
Possible Additions to Term Life Insurance
Some options that enhance the cover offer by term life insurance, for example, additional insurance which guarantees the monthly payments are met in case of illness and inability to work, will keep the policy in force during times of financial difficulty.
Critical illness insurance may be added to term life insurance for greater coverage. A lump sum will be paid out to the beneficiaries when the illness is diagnosed. Policy holders should check with insurance providers if combining policies in this way to check if one or two pay outs will follow the death of the policy holder, if a critical illness payment has already been made.
Terminal illness insurance pays out a lump sum at the start of the time the policy holder is incapacitated, allowing him or her enough time to satisfactorily arrange their financial affairs.
A Waiver of Premium policy covers the monthly payments should you be unable to work because of illness. A period of time known as” deferment, “may be enforced, before such payments are made and these vary from company to company in length.
Opting for guaranteed premiums means that the monthly payments will never increase during the time a policy runs.
'Reviewable premiums are those which are subject to reassessment every few years, usually in five years intervals. Monthly payments typically are higher after reviews.
Including term life insurance in any trusts set up for dependants can relieve the burden of taxes and death duties considerably.
Who can be insured with Term Life Insurance?
There are three basic types of policy involved with term life insurance.
A single life term insurance policy covers one person whose death ends the policy with a lump sum being paid to the beneficiary.
A joint life, first death term insurance policy will pay out a lump sum and terminate after the death of one of the two people covered.
A joint life, last survivor term policy pays out a lump sum when the death of the remaining policy holder occurs.
Term Life Insurance is usually paid for by monthly instalments of the whole year’s premium. Some companies allow the full amount to be paid at one time which may be more convenient for some policy holders.
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