What are the Advantages of Term Life Insurance Policy?
Term
insurance policy provides protection for a specific period of time and
generally pays the benefit only if there is demise of the insured person during
the “term” or period chosen. Term periods typically range from 1 year to 30
years, depending upon the needs and risk protection horizon of the individual which
usually coincides with the active earning life of the person.
Buying
a term life insurance policy is an affordable alternative to costly
conventional savings oriented life insurance policies. In addition to the
affordability part, Term life insurance policies are also flexible, easy to
understand, and easy to buy.
Advantages of Term Life
Insurance Policy are –
Low Cost or Low Premium Policy
The
most important advantage or benefit of taking a term life insurance policy is
the low premium you have to pay for it as term life insurance is not like other
usual conventional policies. The low premium is due to the reason that the
insurance company is charging you the premium only for the mortality risk and
not the saving component as is done in conventional policies. Moreover the
premium of the policy depends on the term of the policy. Shorter the term,
lesser the premium and vice-versa.
Simple to Understand
The
term insurance policies are really easy to understand as compared to other
complex conventional plans. You pay a low, fixed monthly premium based on the
term life insurance policy term length and amount of coverage you choose. The
customer is offered insurance cover on the basis of predefined terms and
conditions which do not change during the term of the policy
Invest Your Money as You
like
With
a term life insurance policy, you can invest your hard-earned money yourself as
you like. Life insurance companies are often very conservative with how they
invest your money. If you are well versed in investing, or good at saving, the
extra money a conventional insurance policy costs may not be worth it. Instead,
you can buy a more affordable term life insurance policy and invest the money
you saved yourself to get the maximum benefits possible.
To Cover Specific Needs like
Mortgage Protection
A
term life insurance policy is great for covering your short-term financial needs. Term life insurance can serve as mortgage protection for your family due
to premature death of the insured. The main breadwinner in a house can buy a
term life insurance policy that matches the length of his or her home's loan to protect
their mortgage.
No Burden of Continuing
the Policy if not Needed
Another
advantage of the term insurance policy is that you can discontinue it if not
needed without bothering for any procedure. In other words, when you purchase
term insurance, it’s sort of like renting a house. All the benefits of usage
and staying in continue for as long as you continue paying rent. As soon as
your lease expires, you must leave. Even if you rented the house for 30 years,
you have no “lien” or value that belongs to you.
Income Tax Benefits
The
amount of premium you pay for your term life insurance policy entitle you to
get Income Tax rebate in many countries. Therefore if any term life insurance
benefit is paid when the insured person dies during the term of the policy
coverage, the beneficiary collects the face amount (death benefit) of the
policy income-tax free.
A Word of Caution: Never
give false information while going for your policy — life insurance companies
will investigate before paying. If you do not provide correct information about your habits
and health issues, your policy may be
considered invalid in case there is a claim and your beneficiaries may not
receive any money after you are no more.
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