Is Term Insurance Right For You

Is Term Insurance Right For You



Is Term Insurance Right For You!
For some reason I​ always seem to​ receive a​ lot of​ mail this time of​ year on​ the​ subject of​ Life Insurance .​
Most want to​ know the​ benefits or​ pitfalls of​ Term Life Insurance over Permanent Life Insurance.
Term Life Insurance is​ by far the​ most cost effective way of​ securing a​ life insurance policy available to​ the​ general public .​
Term Life Insurance covers a​ specific period of​ time - normally the​ policy will run for periods of​ 5,​ 10,​ and 20 years .​
As the​ age of​ the​ insured increases,​ the​ cost of​ the​ premium will increase .​
Premiums are calculated on​ the​ mortality rate,​ which is​ usually dependent on​ the​ persons age,​ sex and whether that person uses tobacco.
This type of​ policy allows the​ insured or​ the​ owner to​ pay a​ set premium for an​ agreed period .​
The Insurance company provides monetary benefits to​ the​ beneficiary in​ case of​ death of​ the​ insured during that period .​
Usually,​ the​ benefits received on​ the​ death of​ the​ insured is​ income tax free.
There are four parties in​ term life insurance: (1) the​ owner is​ the​ one who pays the​ premium; (2) the​ insured is​ the​ one on​ whose death,​ a​ death benefit (face value) will go to​ the​ beneficiary; (3) the​ beneficiary is​ one who will receive the​ proceeds of​ insurance on​ death of​ the​ insured; and (4) the​ insurer is​ the​ company providing the​ insurance .​
Depending on​ the​ Insurance company you​ choose,​ the​ premiums can be paid monthly,​ quarterly or​ annually .​
For example,​ Fred pays $50 dollars monthly to​ XYZ Company for insuring the​ life of​ Margaret (his wife) for a​ period of​ 10 years .​
Should Margaret die during the​ 10 years of​ the​ agreement,​ XYZ company will pay $25,​000 to​ Joe (son of​ Fred and Margaret) .​
Here the​ insured is​ Margaret,​ the​ owner of​ the​ policy is​ Fred,​ the​ beneficiary is​ Joe and the​ insurer is​ XYZ Company .​
If Margaret does not die during the​ 10 years,​ XYZ Company will not be liable to​ pay any money to​ any of​ the​ parties involved .​
Often the​ owner and the​ insured are same .​
That is,​ a​ person buys a​ policy to​ cover his own death and nominates a​ beneficiary .​
Husbands and wives often insure each other in​ case of​ death.
What is​ Term Life Insurance? It is​ a​ legal contract with terms and conditions and assumed risks .​
Sometimes there can be special provisions in​ the​ agreement like suicide terms,​ wherein on​ suicide of​ the​ insured,​ there is​ no benefit accrued to​ the​ beneficiary .​
Term Life Insurance is​ based on​ two concepts: (1) theory of​ diminishing responsibility and (2) Buy Term and Invest the​ Difference (BTID) .​
With Term Life Insurance,​ the​ responsibility or​ liability of​ the​ insuring company reduces as​ the​ policy reaches its maturity .​
What makes Term Life Insurance the​ most cost effective type of​ insurance available to​ the​ public is​ that there is​ no cash value at​ the​ end of​ the​ period .​
Studies have shown that the​ mortality rate in​ Term Life Insurance can be as​ low as​ 1% .​
Hence the​ concept of​ BTID.
Rather than going for permanent life insurance (where on​ the​ expiry of​ the​ agreed period,​ the​ owner will accrue some cash benefit and there is​ a​ savings component in​ it) it​ is​ considered cheaper to​ buy term life insurance and take care of​ the​ savings components by investing in​ other areas.
With the​ present market giving good returns on​ investments,​ buying a​ term life insurance is​ a​ more attractive option than permanent life insurance.
Have an​ opinion or​ a​ question you​ would like me to​ answer,​ then write me! www.CarlHampton.com




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