Term life insurance
What is term life insurance?
Coverage only for a specific period chosen by the policy holder. (5 years to 45 years max)
Example : Mr. Mike is covered for $500000 for 20 years so if Mike dies within 20 years then his beneficiary
gets $500000 but if Mr. Mike dies after 20 years his beneficiaries will get nothing.
Why should I buy term life insurance?
its main use is to provide coverage of financial responsibilities for the insured or his beneficiaries.
e.g. : Mr. Mike applies for home loan for 25 years and if he dies within this period then the whole responsibility
of paying the loan will come on his spouse.
What other benefits can i avail apart from life cover?
• Critical illness
• Permanent total disability
What are the disadvantages of term life plans?
• No cash value so no returns on premium
• Limited rider benefits choices.
• All benefits terminate after the term is over
• Cannot take beyond 45 years
What are the advantages of term life insurance?
• Term life plans are very cheap
• It is pure life insurance plan and has nothing to do with market ups and down
• It is a global plan
• No surrender penalty
• Cancel or top up anytime
• Premiums don’t change
• Can take a single life or a joint life first dead plan
Both term insurance and Whole life insurance use the same mortality tables for calculating the cost of insurance.
Death benefit is income tax free. However, the premium costs for term insurance are substantially different
than those for Whole life insurance. The premium charged on term life covers is only for a year, as continue
paying the premium the policy keeps renewing.
The reason the costs are substantially different is that term programs may expire without paying out, while
permanent programs must always pay out eventually.