Completely Understanding The Term Life Insurance Policy

Life insurance is defined as a contract between 2 people that is, the insured person and the insurance service provider. The contract is about paying the amount assured (death benefit) to the listed beneficiaries in the event of death of the person insured. There are a number of different insurance policies and plans available in the market by various insurance companies. Term life insurance policies are one of such popular types of life cover policies. This type of insurance plans provides complete coverage and indemnity but only during the term life of the policy. You are required to pay the amount of premium only during the term of the policy and in an event of the death of the insured; the beneficiaries will receive a lump sum amount of death benefit. Also, the assured sum of the death benefit is 100% tax free for the beneficiaries.

In case of these term life insurance policies, the saving component is completely missing. It simple words, there is zero wealth accumulation on the insurance premium and the sum assured received by the beneficiaries will be equivalent to the amount mentioned in the policy. In case the policy owner lives for a time period more than the term of the policy, he/she is not entitled to any claim from the policy. Therefore, it is advisable to increase the term of the policy before its expiry date. Furthermore, you cannot surrender your policy before the term in order to withdraw the cash.

There are different types of term life insurance policies available in the market these days. Some of the popular types of these term policies are mentioned below.

1. Level Term
In this type of policy, the amount of the premium remains same throughout the time span of the policy. Generally, the term of most of the term live cover policies and plans is about 20 years. This term can be increased by renewing the policy before the expiry of the period. These 20 year policies are considered best for the people belonging to the age group of 40 years and below. The normal time period of these policies available to the investors are 5 years, 10 years, 15 years, 20 years and so on. The terms policies of 15-30 years of time period are also known as the mortgage policies. These policies can be utilized in order to pay off any mortgage balances in the event of the demise of the insured person.

2. Increasing/ Decreasing Term
Under this type of policy, the amount of the safety cover tends to increase or decrease with the passage of time. The Premium of the policy remains same during the term period but the sum assured to the beneficiaries increases or decreases with time.

3. Convertible Term
The convertible term insurance policies provide the owner with a choice of converting their term based policy to a permanent one. This choice is very beneficial for the people who, at a certain point of time, feel that they will be capable of paying higher premium in the years to come.

So, this was all you need to know about the term life insurance policy and its types.