What is term life insurance?
A term life insurance policy insures your life for a fixed period of time and pays out a fixed sum if you
die any
time during the term of the policy. Being a family person, there's always this hidden concern that in
that event
that you're not there, how will you love one's cope? A life insurance policy provides them with a
lump sum
Pay out should the unfortunate happen and you pass away. In essence, you pass away during the term of the
policy,
your beneficiaries are paid a lump-sum. This leaves the policyholder the peace of mind for a monthly fee
that loved
ones will be covered for an agreed amount which could go towards funeral expenses and pay household bills
for a
period, depending on the size of the cover, it could be life-altering. If there is a need for the
beneficiaries to
be paid regardless when death happens, then that is called Whole of life cover and is more expensive than
term level
policies but it has no upper age limit or time restrictions.
Understanding the Fundamentals of Level Term Life Insurance
Level term life insurance provides peace of mind with a guaranteed Pay out during a set period. This type of
policy
offers a fixed sum of money, known as the sum assured, for a specified term, typically between 10 to 30
years.
During the term of the policy, the level of cover remains the same, regardless of your circumstances. If you
pass
away during the term of the policy, your beneficiaries will receive the Pay out which can be used to cover
expenses,
such as mortgage payments, household bills, or your children's education.
One of the key advantages of level term life insurance is its simplicity. The policy term can be tailored
to your
specific needs, depending on the length of your financial obligations. For example, if you have a 25-year
mortgage,
you may choose a level term policy that aligns with the term of your mortgage. This ensures that your loved
ones are
protected financially, allowing them to continue living in the family home and maintaining their quality of
life.
Another benefit of level term life insurance is the cost-effectiveness. Premiums for level term life
insurance tend
to be lower compared to other types of policies, such as whole life insurance or universal life insurance,
which may
offer cash value accumulation and investment options. Level term life insurance focuses solely on providing
a Pay out
to your beneficiaries, making it a simpler and more affordable option for many individuals and families.
However, it's important to consider the drawbacks of level term life insurance as well. If you outlive
the term
of the policy, the policy expires and there is no Pay out. This means that if you had level term life
insurance for
20 years and you pass away after the policy term, your beneficiaries would receive nothing. Additionally,
the
premiums for level term life insurance may be higher compared to other policies such as decreasing life
cover,
especially if you opt for additional benefits, such as critical illness cover, that can be included as part
of the
policy.
Overall, level term life insurance provides financial security at an affordable price. It ensures that your
loved
ones are protected and can continue to maintain their standard of living, even in your absence. However,
it's
important to carefully evaluate your financial circumstances and consider the level of cover needed, the
term of the
policy, and the monthly payments before making a decision.
Level Term Life Assurance comes with its own set of advantages and disadvantages.
While level term insurance policies provide a lump sum Pay out to the beneficiaries, the policyholder's
loved
ones are protected from financial disruption. However, if the policyholder outlives the term, the policy
expires
with no Pay out. Additionally, premiums for level term life insurance may be higher compared to other
policies.
Optionally, level term life insurance can offer critical illness cover as an additional benefit.
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