Term Life insurance is gaining popularity in the market today. It is becoming to be the most sought after insurance policy that most people would buy. Because of its affordability, many people have the means to purchase Term Life Insurance. However, no matter how attractive a Term Insurance may sound, it is still important to know its advantages and disadvantages.
For Term Life Insurance, we know that there is no cash value from the premiums paid. This kind of insurance is affordable because it is only temporary, which means it only covers a specific period of time. The beneficiary of a Term Life Insurance is also insured with a significant amount while the policyholder is paying less, especially if he is healthy and young.
There is indeed a significant difference in amount of the insurance premiums paid for a Term Life Insurance compared to Traditional Life Insurance in the market.
Affordability: Term Life Insurance vs. Traditional Insurance
In the history of insurance, Term Life Insurance offers the most affordable life insurance in the market. Below are some of the reasons which make it is less expensive than the other kinds:
Short-term – Temporary
Term life insurance is only temporary, it only covers a specific period of time. This is sold in terms of years of coverage, like 5, 10, 20, or 30 years. Renewal is commonly offered at the end of the term based on the conditions stipulated in the contract.
People usually buy a Term Life Insurance with the thought that they will pass away within the contract date of the policy. As such, their beneficiaries will be able to claim the insurance benefits of the Term Life Insurance. However, if you are still living at the end of the term of your life insurance, your beneficiaries will not get anything.
Low Death Rate
Insurance companies benefit a lot in Term Life Insurance policies as most policies are survived by the policyholders. They have fewer insurance claims compared to traditional insurance contracts. Most of the Term Insurance policies turn out as profits to insurance companies.
Short Duration
Since Term Life Insurance policies cover only a specific period of time, some clients would opt to convert their policies to a more permanent insurance plan. Also,there have been so many types of insurance policies in the market that have premium value at the end of their policies. This has become more attractive to some clients. These scenarios don’t bother the Insurance Companies because it is a win-win situation on their part.
Term Insurance may not be the best choice for everyone. However, to some people, this is the best solution for their situation. Not only because it is affordable, but it tailor-fit to their needs
Advantages of Term Life Insurance
Discussed below are the advantages and disadvantages of purchasing Term Life Insurance.
High Policy Value
Term Life Insurance is so affordable that policyholders can pay for high payout insurance coverage. Some go as high as 1 million or more. This is so the policyholders can provide for their beneficiaries when they are no longer around.
Affordability
Term Life Insurance is popular in the insurance industry because of its affordability. This is more attractive to younger and healthy clients because Term Life Insurance is even cheaper to the young ones. It is very interesting to be able to find security for your future at the price of a meal.
Insurance Riders
There are many options or riders that are being offered along with insurance policies nowadays. This provides extra benefits to the policyholders. For Term Insurance, this has also become available so you can have several benefits while living.
Convertibility
Insurance companies have addressed the needs of their Term Life Insurance clients by offering the option to convert to Permanent Life Insurance. The conversion can be done whether it is at the end of their Term Policy of within the period of the policy. Policyholders have the option to change a portion of their policy or convert the entire policy as a whole.
The good thing about conversion is that policyholders get to skip the excruciating process of applying for a Permanent Life Insurance. Most often than not, the policyholder’s age is the only thing taken into consideration during the conversion of the policy.
Disadvantages of Term Life Insurance
Some products in the market come with some disadvantages. Consumers just need to be aware and make these advantages work for them. The cons of Term Life Insurance does not make it wrong or not beneficial to its policyholders.
Insurance Coverage is Temporary
Term Life insurance as the name suggests, only covers a certain amount of time. Apparently, this kind of policy is valid only during the term of the plan. You can only reap the benefits when you pass away during the period covered, otherwise you outlive your plan and get nothing from the insurance company.
No Benefits while Living
The only benefit you can get from Term Life Insurance is Death Benefit for your beneficiaries. This is unless you purchase an option that will provide living benefits to your Term Life Insurance policy.
Cash Value is Zero
Permanent Life Insurance is also an investment because while living, you have the privilege to withdraw some of your premiums when the need arise. However, with Term Life Insurance, there are no living benefits. The insurance premiums that the policyholder is paying covers only the insurance costs and other fees. At the end of the term when the policyholder survived his term life insurance, the Insurance Company does not owe anything to the insured.
Non-Flexible Terms
Most Term Life Insurance policies are not flexible in their terms and conditions. The policyholder is bound to the signed policy upon the commencement of the contract. The value of the policy cannot be amended as well as the premiums to be paid for the policy.
It is important to understand the advantages and disadvantages of availing Term Life Insurance and how this can benefit you and your family. It is helpful to reach out to an Independent Insurance Professional to provide you with the needed information to find the best insurance policy that will serve your needs.
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