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Why People Turn to Term Life Insurance Policies

With the rising number of different insurance policies in the market, one finds it very difficult to make a wise decision as to what particular policy to avail. Factors usually involved in choosing the type of insurance policy are age, money, and benefits. In adherence to consumer needs of affordability and coverage, term life insurance has become the most ideal insurance policy in the market.Term life insurance can be considered as the simplest among the different kinds of life insurances. It is low cost and affordable to an average earner. It covers a person for a limited period, but he has the option of dropping the policy when the period lapses or he could continue the coverage by paying increasing premiums annually. In the instance of death of the insured within the policy term, the beneficiaries would receive the death benefit. Term life insurance provides coverage on financial obligations. Some of these responsibilities include funeral costs, dependent care, mortgages, and consumer debt.The shortest possible coverage period for this type of insurance is one year. If the insured person dies during the policy period, the insurance company pays the death benefit. If the insured dies after the period of coverage, no death benefit would be paid. However, due to the low probability of a person dying after a year of acquiring insurance protection, people opt for a longer period coverage than one year.The annual renewable term insurance (ART) is the commonly purchased form. This type offers more flexibility for the insured. The premium for one year coverage is paid but the policy could be renewed every year for a particular term or a maximum period of years. The periods usually vary from ten to thirty years, or up to the age of 95, depending on the insurance company. As the insured gets older, the premiums continually increase in every renewal.Renewing a policy is one of the challenges that policyholders face because they have to prove their insurability. This refers to the quality assigned to a person by the insurance company, determining the risk involved if the company would decide to insure the said individual. A person having a very low insurability would most likely be refused an insurance policy by the company. An example of a person with low insurability is one who has a terminal illness and has a life expectancy of less than a year. The probability for such person to die within the coverage period poses a great risk for insurers. However, insurance companies have added a feature in life insurances known as guaranteed reinsurability. This feature allows an insured person to renew his policy even without the proof of insurability.Insurance companies use different tools in issuing rates for different policies. A mortality table is used to calculate the cost of insurance as well as the death benefit which is free from income tax. This continues while the policy is valid and the premiums are current. Term life insurance provides maximum coverage with just a little cost. It is best suited for families or individuals who have debts and liabilities, young children of school age, businesses, or for those who want to leave a legacy to their loved ones.