What is Term Life Insurance?
Term life insurance is a type of insurance policy that pays a death benefit to the beneficiaries if the insured person dies within the specified period of the policy.
With a term life insurance contract, you can rest assured and in peace knowing that your important life, property, and family concerns are taken care of when you are no more.
How Term Life Insurance Works
Here are the fundamental things to know about how term life insurance works:
The premium of a term life insurance policy is determined by the payout amount, age, gender, and health.
Before buying the policy, the insurance company may require a medical examination and other things like your driving record, work, hobbies, and family history.
If you die during the policy term, the insurer (insurance company) will pay the policy’s cash benefit to your beneficiaries.
If you do not die and the policy expires, there is no payout. The value of term life policies is guaranteed death benefit.
Types of Term Life Insurance
Here are the different types of term life insurance policies depending on your preference:
Here, both the death benefit and premium are fixed throughout the length of the policy which could range from 1 to 30 years.
Yearly/Annual Renewable Term
This policy is renewed each year. The premium changes and increases as the insured person ages.
Here the premium is fixed but the death benefit decreases over time. It is mostly used with a mortgage to match the declining principal of the property loan – in this case, the beneficiary is the mortgage lender, not your family.
Return of Premium Term
If you outlive the policy, this term life insurance would refund the premiums you paid. This refund makes it more expensive.
What to Know When Choosing a Term Life Insurance
Before you buy term life insurance, it’s advisable to be knowledgeable about the cost implications and other covered features.
Here are some things to know when choosing a term life policy:
Generally, people seeking term life policies want substantial coverage at affordable costs. Therefore, you want an insurer that provides this with flexible benefits at a good price.
Living benefits lets you access your own death benefit in the event of a serious illness to pay for medical bills. Make sure the policy offers these benefits.
You should also check if the policy is renewable. This helps you when you get to the end of the term period and still need life insurance but have health issues.
Can you switch to a permanent life insurance policy? Check if this is possible and know the time-space when it is available.
This allows you to take term life insurance of different lengths. For example, you might buy a 20-year policy to cover the length of a mortgage and a 5-year policy to cover the time until your kids are out of school. This ensures you’re not combining into one policy.
Applications usually take a month or more to process. Temporary coverage covers you during the application process. Check-in with your agent if you can lock in coverage from your application date forward.
Benefits of Term Life Insurance
Here are some of the benefits of term life insurance:
One of the primary term insurance benefits is that it is available at a premium that you can easily afford. Parents can use it to get large amounts of coverage for reasonably low costs. Also, the earlier you buy, the lower the premium.
Another good feature of a term insurance plan is that it is easy to understand. There are no hard-to-understand insurance terminologies about the policy. Term life policies are also fit for people who only temporarily need specific amounts of life insurance till their beneficiaries no longer need financial protection or can self-insure.
Multiple Death Benefit Payout Options
Besides the lump sum your beneficiaries get at your demise, some term life policies also give you the option to receive a monthly income. This monthly income can be useful for your family to manage recurring expenses.
While the premium you pay is tax-deductible, term life payouts are tax-exempted.
Severe Illness Coverage
Another benefit of term insurance plans is that you can choose to get critical illness coverage. Anyone can suffer from illnesses during any phase of life and this ensures you do not drain all your savings.
How Much Term Life Insurance Do You Need?
Generally, a term life policy is intended to cover your obligations over a particular period of time. Therefore, you’ll want to know the amount you will need over the time period be it to cover a debt or pay for your family expenses.
Factors that affect Term Life Insurance Rates
- Height and weight
- Current and past health
- Family health history
- Drug use (Nicotine, marijuana)
- History of substance abuse
- Driving record (especially violations)
- Hobbies (any risky hobbies such as skydiving, scuba diving, etc)
- Criminal history
Term Life FAQs
Which is better term life or whole life insurance?
Term life gives a death benefit to a specified beneficiary if you pass away during the policy period while Whole life insurance never expires. Each one comes with its benefits.
What happens at the end of term life insurance?
If you are still alive, there will be no payout. If you are no more, the death benefit will be paid to the specified beneficiary.
Do you lose money with term life insurance?
You only lose money when the term life insurance ends and you’re still alive. This means you and your beneficiaries don’t get anything.
Is term life insurance worth buying?
Yes, it is worth buying term life insurance. The cash value can help your family and beneficiaries and cover your long-term financial goals.
Thinking of buying a Term Life Insurance Plan?
Leadway Assurance offers a pre-priced and affordable Term Life Plan that cost only N10,000 yearly with up to N1,000,000 in benefits. Things happen and some are just outside our control. Having a term life insurance plan cushions the financial fall when you are no longer around. Sign up and buy now on our website. Looking for something else? Request a callback today.