Ever wondered why term insurance plans tend to be cheaper than life insurance plans?
Many of you might be interested in signing up for a term insurance plan because of how incredibly affordable term insurance premiums can be. However, you should definitely do a little research about term insurance before you commit to a policy. Continue reading this article if you’re interested in getting an overview of what term insurance is. This will help you decide different factors about your term insurance plan like how long the tenure should be or how much coverage you should opt for.
What is Term Insurance?
Term insurance is a type of life insurance plan. Term insurance provides coverage not for the duration of your whole life but only for a predecided specific period of time. This predecided specific time period is referred to as the “term” of the policy. In the case that an insured person expires during the term period, a death benefit is payable to the person nominated by the insured person in their policy. Furthermore, policy-holders also receive a payout if they suffer from a permanent disability in the specified time period.
Why are Term Insurance Premiums Much Lower than Life Insurance Premiums?
Term insurance generally has lower premiums than all other types of life insurance plans since it provides coverage for shorter periods of time. The premiums are mainly lower because the death benefit is only paid if the policy holder expires during the specified term. A payout is also given if the policy holder experiences a permanent disability. Otherwise usually there is no payout given on the maturity of the insurance policy if the insured person healthily lives through the term. In simpler words, there is no return on investment and the premium is only paid for covering the risk of death or permanent injuries. There may be an exception to this rule as some term insurance plans offer to return a fraction of the premiums paid by the policy holder when they live through the term.
What are the Eligibility Criteria for Term Insurance?
Insurance companies usually have different criteria to judge an applicant. The minimum age requirement to apply for term insurance is 18 years whereas the maximum limit for age is 65 years.
Is there a lot of Variation in the Premiums Charged for Term Insurance by Different Insurance Companies?
The premium charged to the same applicant for term insurance usually varies from company to company. This is why it’s always a good idea to get price quotations from multiple companies to weigh all your options before you sign a term insurance policy.
What Factors Affect the Term Insurance Premiums I Am Charged?
Firstly, the tenure of your term insurance plays a great role in determining how much premium you are changed. The longer the tenure is for your term insurance, the higher the premium will be. Furthermore, your term insurance premium is also affected by factors like your age, gender, medical history, and whether you smoke or not. These factors come into play when determining premiums for all types of life insurances.
Term insurance plans are a great option for people who are looking for insurance plans with premiums that are light on the pocked. This way you can easily provide financial support to your family in the unfortunate case that something happens to you without creating a dent in your finances.
