| Term Insurance
Term insurance is the purest form of life insurance, consisting only of a
death benefit without the frills. It is for a fixed term varying from
one to 20 years, after which it must be renewed. If you die during the
term, your benefits are paid to your beneficiaries. Term life insurance
premiums are cheaper compared to whole life which makes it possible for you
to afford more coverage with the same amount of premium. |
| Disadvantages
* It is not permanent
* You may not be able to renew it above a certain age, e.g., above 70
years in some states. However, this may not necessarily be
disadvantageous since you may not need life insurance at that age because
your dependents will most probably have been able to establish on their own
by then. |
| There are four varieties of term life: Annual Renewable Term (ART), Level
Term (LT), Modified Level Term (MLT), and Decreasing Term (DT). The
differences between them are in the way the premiums and death benefits are
structured. |
| To pick a life insurance policy that is best suited for you, you should
consider the advantages and disadvantages and relate them to your
particular situation. However, if you are the breadwinner of a young
family with limited resources (which is true of most young families), you
will most probably be better off with term life because you will be able to
afford a greater amount of death coverag e for the same amount of premium.
On the other hand, if for any reason you want coverage throughout your life
or for more than 20 years (e.g., because of health reasons or for estate
planning purposes), then a whole life policy may be your best bet. |
| Traditional Whole Life, is the original cash-value policy. The insurance
stays in force as long as you pay your premium, i.e., it is permanent. The
premium you pay is fixed and depends on your age when you buy the
insurance. The insurance company will invest your premiums and you can
borrow from the cash value built up if you so wish at a favorable rate of
interest. |
