What is term life insurance?
Term insurance is basic, inexpensive and easy to understand. It gives you all the coverage you need and none that you don't. Its a good fit for short-term needs or those that have a specific end point.
This offers insurance protection for a limited period only whereby the money is paid up if you pass away or if you suffer total and permanent disability. Simply choose a term policy duration to meet those needs. That's why it's the best choice for almost everyone.
As the name implies, a term insurance policy is good for a specific period of time; that can be one year, 10 years, 20 years or even up to 30 years. Given that you generally need life insurance only until you've managed to save up money elsewhere, just pick the term that dovetails with the time you need coverage. If you die during that term, your beneficiaries get a payout, known as the death benefit. If you die after the term expires, there's no payout.
What are the different types of term insurance?
There are two kinds. There's "annual renewable term," which gives you one year of coverage at a time that you renew annually, and "level premium term," which you buy for a specific multiyear period - say, five, 10 or 20 years.
Annual renewable term usually has the lowest annual premium to start, but the premium rises as you age. If your main concern is keeping your initial costs down for example, because you think your earnings will rise significantly in the future - consider going with annual renewable term.
For example, to help ensure your family will be able to pay a 20-year mortgage, you can choose a 20-year term policy. The policies allow you to choose the length of coverage you need, such as 10, 15, 20, or even 30 years. During this period, called the level-premium period, your premiums are guaranteed not to change. After this period, however, premiums will increase each year until the policy ends (usually at age 95) and may not be guaranteed.
The pros of term life insurance
Lower Premiums: Term life insurance has the lowest premiums if compared to other types of life insurance – you can get maximum amount of protection for the least amount of premium paid. You could find, for example, an insurance company that offers a term life insurance premium starting from as low as RM 175 per annum (usually you would have to be aged 18 – 45), with a sum insured of up to RM 40,000 (natural death) and RM 80,000 (accidental death) in return for this low premium.
Flexibility of Application: Because of its non-permanent state, insurance companies are generally more flexible in accepting applications for this type of insurance, especially for those who are under 50 years of age and have a good health condition. In fact, most insurance companies do not require a medical examination from applicants for term life insurance.
Flexibility of Policy: Many term policies offer a term-to-permanent insurance privilege.
The cons of term life insurance
Cost Increment: While we mentioned that term insurance can be renewed or changed to a permanent life insurance, this might cost the premium to increase dramatically. This depends on several factors such as the age and the health condition of the policy holder, as well as the policy’s term and conditions.
Age Restrictions: Unlike a permanent life insurance, age matters when it comes to term life insurance. Typically, insurers won’t allow people from the age group of 50 – 55 and above to buy a term life policy.
No Cash Value: As previously stated, term life insurance focuses solely on life coverage and has no investment value, therefore there will be no added cash value in your coverage sum (Cash Value is the amount of money that you will get back if you cancelled your policy).
Sources From:
http://lifeinsurance.prudential.com/view/page/iliconsumer/30454
http://www.insuranceinfo.com.my/choose_your_cover/secure_your_future/life_insurance.php?intPrefLangID=1
http://www.insuranceinfo.com.my/choose_your_cover/secure_your_future/life_insurance.php?intPrefLangID=1
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