How is Term Insurance different from Life Insurance? Question ...

How is Term Insurance different from Life Insurance?

I am planning to buy an life insurance policy. I have heard about this new insurance product- term insurance. I wanted to know its benefits and how is it different from life insurance. thank you for your help. I would really appreciate your efforts if you can help me out with this as soon as possible. thanks!

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Term insurance is life insurance.

You have 2 options, basically. Permanent insurance and term insurance.

Term insurance costs less up front. Its like renting an apartment. You get to choose a time frame from 1 year to 30 years. It?s a good policy if you need lots of coverage now but have little money, like a young family with lots of kids or someone with a mortgage and school loans, etc. It is cheap because it seldom gets paid out because most people live beyond the term of the policy.

Permanent insurance is there when you will most likely need it because it will never end as long as you keep paying or have paid enough into it that it will sustain itself. It is cheaper in the long run because if you cancel it after 20 years, you get all your money back. Its NOT an investment product, don?t let anyone fool you. But, it isn?t a bad product.

Your best bet, depending on your needs (consider if you want debt paid, income replacement, help with school, etc) is to purchase a combination. Give yourself $50K of permanent insurance (cover burial expenses, final bills, etc) and take out term for the rest of your debt.
Term insurance is a form of life insurance.

How term life insurance works is that you pay premiums for a fix amount of time. For example, a 20 year term means you pay the same amount of premiums for 20 years. At the end of the 20 year, you have options on what you want to do.

Do you still need life insurance at this point when you are older, have no debts, and have lots of money saved (hopefully)? If yes, you can convert the term policy into whole life, universal life, or into another term policy. You can also choose to renew the term policy every 1 to 5 years without having to convert, but each time you renew, the premiums will be higher because its base on the age you renew it at.

Term life insurance does not build cash value, which makes it different from the rest of the life insurance products such as whole life or universal life. Therefore term life insurance is cheaper than whole life or universal life insurance, which also means that most people can afford the right amount of coverage they really need at a lower cost.
by bron357Member since:July 30, 2010Total points:19,500 (Level 6)Add Contact
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Hi, term life usually has a flat premium structure ie the same amount premium payable every year. This makes it appear more expensive at first, but over the years you hold the policy, it works out cheaper. An ordinary policy normally has increasing premiums ie every year it gets more expensive for the same amount of cover.
Check your policy carefully, most policies have an age 70 expiry ie it ceases. You can get life insurance after 70 but the annual premium will be thousands of dollars!
Neither usually have a savings component or a cashable value. That?s a different type of policy called an Endowment policy or Whole of Life. Not very popular anymore because the value at the maturity because of inflation, is small!

Source(s):

I studied life insurance as part of my Finance degree.
1 year ago
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Source: http://www.decadesilove.com/2012/07/24/how-is-term-insurance-different-from-life-insurance-question/

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