Term life insurance is also referred to as term assurance. This type of life insurance only offers coverage for a designated period of time. During this term, a fixed rate is applied. Once the term concludes, the same rate no longer applies and insurance is no longer valid until a new payment rate is determined. This method offers one of the least expensive ways to obtain life insurance when needed.
The Death Benefit
Term assurance is offered as a death benefit. This means the money put in is only issued if someone actually passes within the term period. If the term ends and no one has passed, then the money put into the insurance plan is forfeited. If the person has passed, then the beneficiary receives the death benefit amount.
The money paid out from term life insurance is tax-free. This means the government is not able to put a tax on it. It does not have to be listed on a tax return, and is instead able to be used for necessary expenses.
This type of insurance has lower costs than permanent plans. This is because there is no guarantee of payout. If the insured does not pass within the term, then no money is provided.
Because of the way this plan is set up, people are able to pay lower monthly costs in order to have the life insurance. Many choose this lower cost option to save on money, but still want to have some sort of insurance plan available just in case something were to happen.
One Year Option
Term assurance may be offered at a fixed rate for up to 30 years. However, many people are not ready to make this commitment. Instead, some choose to partake in a one year option.
This short solution helps people gain insurance in case something happens to them. They can then take the year to better plan out their future and choose a longerterm insurance option that meets their needs.
People are able to select their term, within the specifications allowed by the insurance company. This typically involves 10, 20, and 30 year terms. The monthly rate is fixed for the entire duration of the term and will only change after the term has ended.
There is an option available for those looking to see some of the premiums they paid returned to them once the policy ends. This is known as a Return Premium Term Life Insurance Plan. This option provides a far better solution for most, as they actually see some money at the end of it. This is typically allowed if a lengthy term option is selected, such as 30 years, which the person outlasts. This option is not ideal for everyone though, as the premiums are higher to pay. A higher coverage amount is also required.
Term life insurance is a popular option in today’s economy. Many are choosing term assurance so they can save on money for the time being, yet still have the protection they need. It is a short term option that appeals to many.