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Term Life Insurance

This is often defined as the simplest form of life insurance on the market, because of the fact that you purchase coverage for a specific price for a specified period. This temporary life insurance option provides coverage at a fixed rate of payments for a limited period of time Ė for the relevant term. Once the predetermined period expires, you will no longer be guaranteed coverage at the previous rate of premiums, and you then have to decide whether you would like to obtain further coverage with different payments under a new set of conditions or if you would rather simply forgo coverage.

Policy length options

If you opt for term life insurance, you will have the following options when it comes to prospective policy lengths: one year, five years, ten years and fifteen years Ė with some insurance companies offering up to 30 year terms of cover. If the policy owner happens to die while the policy is still in effect, the insurance company pays out the face value of the policy. In the case of the insured person living longer than the term of the policy, the insurance plan will expire and nothing will be paid to the respective beneficiaries.

Level and decreasing schemes

When you enter into a contract with your insurer to cover your life for a predetermined number of years, you essentially have two options of cover to choose from: level term and decreasing term. These are slightly more intricate to understand when assessing what is best for your needs, and every personís financial conditions will play a determining role in their decision.

Level term insurance provides a predetermined rand amount of coverage for the full period of the policy. For instance, a five-year level term policy for R100,000 will pay R100,000 at any time during the effective period, should the policy owner die.

With the decreasing term option, the sum of money that is to be paid when the policy owner dies is gradually reduced over the policy period. Therefore as the policy ages, the amount owed to the beneficiaries shrinks. People often choose this route when they know that their financial needs may be decreasing during the policy period. For example, you may not feel that you need as much life insurance in the future as you currently do, if you were to purchase a 10-year decreasing term policy and anticipate having your house paid off during that period.

Renewable or Non-Renewable?

There are also renewable and non-renewable term life policies, both of which can be dealt with quickly. Renewable term life means that you automatically re-qualify and can continue with your existing policy once the original term has ended. On the other hand with non-renewable, a series of physical and health-related tests will be conducted when the policy expires, in order for the individual to qualify for a new policy.

Benefits
  • It is a straightforward insurance policy: if you die during the term of your policy your beneficiaries get paid. There is no savings component, so thatís all there is to it.
  • It is affordable compared with other types of life insurance. You wonít be paying anything extra to cover investment fees and so forth. Also, because term insurance features limited periods, term premiums are initially lower than whole life premiums.
  • It is convenient because you only pay for what you need, when you need it. Life insurance coverage is typically needed for a specific period of time, which makes this option ideal.
  • Term life insurance is easy to shop for: with little effort you can browse insurance company quotes and find the best deal.

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