What is Term Life Insurance?

Term Life Insurance

Term life insurance is perhaps the most simple of life insurance products. Essentially, you buy cover for a specified number of years. If you die within this period, your beneficiaries will receive the proceeds of the life insurance. If you die after the coverage period, there are no insurance proceeds to be had. When the coverage expires, you have the option to renew the policy (buy more years of coverage) or terminate the policy (there will no longer be any insurance coverage provided by this particular policy).

Term Life insurance is temporary coverage. This type of product is considered temporary – as it only provides coverage for a specified number of years.

Term life insurance is a no cash value policy. There is no cash value that accumulates during the life of the policy. This means that once the policy expires, the Insured will not expect to get anything from the policy. The premiums he pays is strictly for the coverage within the policy period. Also, if you are not able to pay your premiums within the life of the policy, the policy will simply lapse since there are no cash values to use to pay for the policy.

Term life insurance is cheaper coverage. Precisely because of the two reasons above, term life insurance is cheaper as compared to permanent or cash value insurance policies. It is important to note, however, premiums may be subject to review regularly and that premiums may increase due to changes in age, health condition and other factors. This means that as you age, the premiums for term life will be more expensive. You can also opt for level term life insurance, which will guarantee the same premiums for the entire life of the policy. However, if you opt to renew or extend the coverage, the insurance company will underwrite the policy and may or may not change the premiums.

Anand Khemka
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