While there are two main types of life insurance, whole life and term, in this article, I will focus on the aspects of term life insurance and the type of demographics it would most suit.
Term Life Insurance: the Basics
Term life insurance is affordable; providing a cash benefit in the event of death, accidental death and even critical illness. It gives protection for a set number of years such as 10, 15, or 20. You can pay the premiums monthly, quarterly or annually.
Two Kinds of Term Life Insurance
One kind of term life insurance is annual renewable. Under this scheme, the premium remains the same for a certain period of years and then increases with each year thereafter. In the later years, the increase in premiums becomes so great that it is no longer affordable or sensible to hold the policy.
Level premium term is the second type of term life insurance in which the premiums remain the same for the entire span of the policy.
To receive the payout for term life insurance, the policy holder must die. The monetary benefits of term life insurance are solely for the beneficiaries. If there is no claim (policy holder does not die) at the end of the policy period, the term insurance plan expires. All the money that had been paid into the plan is lost and cannot be recouped by the policy holder.
Who should get it?
Term life insurance is good for almost everyone. The payout of a term life insurance may help pay for funeral expenses, debt or provide extra income for a spouse or children. Young adults may find term life inexpensive and a good way to provide peace of mind. Mature adults with greater income may choose a term life policy too. According to Jaslyn Wang Shiyun, Senior Financial Planner at AXA Life Insurance Singapore, people why buy term life "are those who believe in: buy term, invest the rest; they accept the fact that insurance is the only tool in the world that can provide for income replacement should any of the unexpected event strikes."
If you are considering life insurance, research and shop around. Think about how much your spouse or beneficiaries will need in the event of your death. Use an online interactive calculator or talk to a financial planner to obtain a term life insurance quote.