Facts Of Term Insurance Policies

Insurance is of two major types namely Term Policy and Permanent Life Insurance Policy. Again both types are sub-categorized into different policies having different norms. The policies mainly differ in number of years covered, total sum assured, premium amount, and benefits included and certain other norms related to particular policy. Insurance policies also differ from company to company but the basic principles do not deviate.

In term policies, the person taking the insurance policy has to pay a fixed amount or premium for a term or a period of time. This amount does not vary term to term and remains constant. Almost all the insurance company charges only a nominal premium for term policies. The number of years starts from minimum of 5 years and extends up to maximum of 25 years. In case of accidental death or natural death within the policy period, the full face value will be paid to the beneficiary. If the death happens after the policy expires then nothing is payable to beneficiary.

Most life insurance companies give an option of converting the term policy into permanent policy within a specific period. In a term life policy, the minimum term starts from 5 years but you also have a yearly renewable term policy. It is considered to be the less expensive policy type but it may turn expensive when you are planning to pay it for an extended period of time.

During the commencement of the yearly renewable policy the premium really starts with low amount but increases each year. Though you may not like this feature, it actually adheres to the genuine insurance norms. The fact is the premium increases, as you grow older. As you grow older, you may develop some kind of illness causing even death. So, the premium is charged based on your age attainment.

A decreasing term life insurance policy is the most sought policy among the other types of policies. The main reason for this is the people purchase them for mortgage protection. This policy is designed especially for this benefit. When a person buys a house, he pays a portion of the total cost and the rest is borrowed from a bank or mortgage company.

In case the person dies during the mortgage period, the responsibility of paying the dues falls on survivors. You can eliminate this trouble by purchasing a decreasing term life insurance policy. In the case of death of the insured, the insurance company will come forward to settle the dues. Usually the face amount decreases as the mortgage amount decreases. The premium remains constant through out the term.

The 5-year term policy is designed for people who cannot afford to pay long-term policies. The policyholder can convert this policy into a permanent policy within a specific period of time. The premium and the death benefit remain constant throughout the term. The 10-year and policies covering more than 10 years are usually taken by people who plan for life of teenagers at their homes. The long-term policies are generally taken keeping the education cost of children in mind.