Do you know what is Term Life?
We have been asked this question many times. Its name seems to cause some confusion, so we are going to clear this question up.
Term Life Insurance is a type of life insurance that covers the insured person for a period of time. This period of time is the term of the policy and hence gives the insurance its name.
Where whole life covers the insured for their whole life, Term Life Insurance covers the insured for a limited period of time. This term can range from 1 year all the way up to 50 years if so requested.
As the insurance is restricted to the period of time (the term), the risk for the insurance company is less and hence the cost of the policy is less. The risk to the insurance company can be calculated by them as it only covers a number of years. If you compare this to the Whole Life Insurance, where the insurance company know they will have to pay out the sum insured one day, it is clear why there is less risk.
How much does it cost?
The cost of Term Life is based on a number of factors such as the age of the insured person, the length of term of the policy and the health of the person taking out the policy. It will also vary from one insurer to another by as much as 60% so it pays to look around.
Why use Term Insurance
Many people use Term Life insurance to cover their mortgage or any other debts that they may incur. This is done as the term of the policy would run until the dept is paid off. It can also be used to provide cost effective life cover and for those counting their bucks, it is the most cost effective solution to provide for your family.