Term Life Insurance refers to those insurance policies thathave temporary life insurance protection. This means that you are ensuredsecurity only for a fixed period of time. Another factor that characterizesthis type of policy is that you have to pay low premium compared to other typesof life insurance. This is because it builds no cash value and you pay only forthe cost of insurance (C.O.I.). The C.O.I. is the amount of money the insurancecompany charges to keep your life insurance policy in force. And this dependsgreatly on your age and health at the time you apply for coverage. The C.O.I isusually determined at the time you apply and increases at each policyanniversary as per the Yearly Renewable Term policy. The C.O.I. increases dueto the fact that as you get older, it becomes more expensive to insure yourlife.
The C.O.I. remains same during the initial guaranteed periodbut increases sharply with time as per a Level Term policy. Term Insurance paysa fixed lump sum to your designated beneficiary incase of your death within theperiod covered by the policy. The policy protects your family by providingmoney which they can invest to replace your salary. This also includesresources to cover the immediate expenses incurred by your death.
Pros:
Term Insurance is best for young, growing families, whosefinancial needs are especially high but whose resources are often insufficientto cover those needs. The Term Insurance policies are quite affordable in thebeginning compared to other policies as it builds no cash value.
Cons:
Though the Term Insurance premiums are affordable initially,yet it increases with age with death risk becoming obvious as people get older.In some cases, the Term Insurance premiums may rise each year or after theinitial guarantee period of 5, 10, 15, 20, 25 or 30 years. In fact, it is seenthat over the age of 65, the cost of Term Insurance becomes quite expensive, andat times too exorbitant.
