What is Term Insurance & Term Life Insurance?

Term policy is nothing but an insurance policy which provides short time coverage. If the insurer died in the term insurance period, the death benefit will be paid to the insurers beneficiaries.  Term insurance is far better than the traditional life insurance. Because term policy is cheaper than that.

There are several types of term policy. There are 10, 20 or 30 years insurance plans available for term. These types of policies are called as “level term” policies. The premium will not increase in the level period of term policy. But after finishing the level the premium will start to increase. Then the policy will be a costly one for you. Moreover you have option to convert policy into a permanent policy. Now lets have a look to the details of term life insurance policy.

There are lots of insurance policies available. It is said that term insurance is more client friendly insurance policy. It is cheaper than others. Term life insurance policy has a difference with normal life insurance policy. Normally insurance company pays money to the beneficiary after the death of the insurance holder. There are three types of life insurance. 

The first two types are variable life and whole life. And the last one is term life insurance. Some part of premium of whole life and variable life is used for investment plan. But in term life, any part of premium doesn’t go to investment fund and is used to pay for the insurance.

Term policy is cheapest than any other policy. Let’s see an example of this.In this insurance if you pay $300 per year. On the other hand you may have to pay $2500 in whole life insurance for the benefit of 250000. Although in this policy premium will increase in every year. 

So if you start with $300 premium in term, when you are 30, you have to pay $12000 when you are 70. Although nobody continues this policy such long times like this. This policy is for a short period of time. So after this discussion we can say that term policy is effective for short time and it is cheapest in the beginning.

Most of the people like term insurance for ensuring financial security purpose. If the clients chose term life insurance he acquires two things at the same time. First of all he can buy a insurance and get funds for investment. So this is very effective way for any individual. But before choosing this you need to know more details about this.

There are different types of term. It is better to choose annual term policy. It would be a nice one for you if you chose 7-year or 10-year plans. You’ll get some benefits of having these insurance. For a short annual insurance the premium rate will increase in lower rate. But if you choose 7/10 year plan, the premium will not increase in the rest of the years. So it is better to choose annual term policy.