The goal of life insurance is to provide a financial security for your family after you die. So, before purchasing a life insurance policy, you should consider your financial situation and the standard of living you want to maintain for your dependents or survivors. Get to know what exactly the term Life Insurance is about, you can find the best deal you want.
Definition of ‘Life Insurance’
A protection against the loss of income
that would result if the insured passed away. The named beneficiary
receives the proceeds and is thereby safeguarded from the financial
impact of the death of the insured.
The goal of life insurance is to provide
a measure of financial security for your family after you die. So,
before purchasing a life insurance policy, you should consider your
financial situation and the standard of living you want to maintain for
your dependents or survivors.
For example, who will be responsible for
your funeral costs and final medical bills? Would your family have to
relocate? Will there be adequate funds for future or ongoing expenses
such as daycare, mortgage payments and college? It is prudent to
re-evaluate your life insurance policies annually or when you experience
a major life event like marriage, divorce, the birth or adoption of a
child, or purchase of a major item such as a house or business.
Term insurance
Term assurance provides life insurance
coverage for a specified term. The policy does not accumulate cash
value. Term is generally considered “pure” insurance, where the premium
buys protection in the event of death and nothing else.
There are three key factors to be considered in term insurance:
- Face amount (protection or death benefit),
- Premium to be paid (cost to the insured), and
- Length of coverage (term).
Annual renewable term is a one-year
policy, but the insurance company guarantees it will issue a policy of
an equal or lesser amount regardless of the insurability of the
applicant, and with a premium set for the applicant’s age at that time.
Level premium term can be purchased in
5, 10, 15, 20, 25, 30 or 35 year terms. The premium and death benefit
stays level during these terms.
Mortgage life insurance insures a loan
secured by real property and usually features a level premium amount for
a declining policy face value because what is insured is the principal
and interest outstanding on a mortgage that is constantly being reduced
by mortgage payments. The face amount of the policy is always the amount
of the principal and interest outstanding that are paid should the
applicant die before the final installment is paid.
