Term Life Insurance refers to those insurance policies that have temporary life insurance protection. This means that you are ensured security only for a fixed period of time. Another factor that characterizes this type of policy is that you have to pay low premium compared to other types of life insurance. This is because it builds no cash value and you pay only for the cost of insurance (C.O.I.). The C.O.I. is the amount of money the insurance company charges to keep your life insurance policy in force. And this depends greatly on your age and health at the time you apply for coverage. The C.O.I is usually determined at the time you apply and increases at each policy anniversary as per the Yearly Renewable Term policy. The C.O.I. increases due to the fact that as you get older, it becomes more expensive to insure your life.
The C.O.I. remains same during the initial guaranteed period but increases sharply with time as per a Level Term policy. Term Insurance pays a fixed lump sum to your designated beneficiary incase of your death within the period covered by the policy. The policy protects your family by providing money which they can invest to replace your salary. This also includes resources to cover the immediate expenses incurred by your death.
Term Insurance is best for young, growing families, whose financial needs are especially high but whose resources are often insufficient to cover those needs. The Term Insurance policies are quite affordable in the beginning compared to other policies as it builds no cash value.
Though the Term Insurance premiums are affordable initially, yet it increases with age with death risk becoming obvious as people get older. In some cases, the Term Insurance premiums may rise each year or after the initial guarantee period of 5, 10, 15, 20, 25 or 30 years. In fact, it is seen that over the age of 65, the cost of Term Insurance becomes quite expensive, and at times too exorbitant.
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