Term life insurance

Term life insurance is the simplest and least expensive type of insurance, as it pays benefits only upon the policy holder's death. With annual renewable term insurance, the policy holder pays a low premium at first, which increases annually as he or she gets older. With level term insurance, the premium amount is set for a definite number of years, then increases at the end of each time period. Experts recommend that people who choose term insurance make sure that their policies are convertible, so that they can switch to a cash-value plan later if needed. They also should purchase a guaranteed renewable policy, so that their coverage cannot be terminated if they have any kind of health problems.

Term insurance typically suitable for younger people with children and limited funds who are not covered through an employer. This type of policy enables such a person's heirs to cover mortgage and college costs, estate taxes, and funeral expenses on his or her death. It is a pure risk cover for a particular period of time. This means that the sum assured is payable only if the policyholder dies within the policy term. For example, if a person buys Rs 2 lakh policy for 15-years, his family is entitled to the money if he dies within that 15-year period.

If he survives the 15-year period, he is not entitled to any payment; the insurance company keeps the whole premium paid during the 15-year period. So, there is no aspect of savings or investment in such a policy. It is a 100 per cent risk cover. It purely means that a person pays a certain premium to protect his family against his sudden death. He forfeits the amount if he lives longer than the period of the policy. This clarifies why the Term Insurance Policy comes at the lowest cost. However, nowadays there are few Term Insurance products which give you certain portion of money even if people survive the term period.

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