Term insurance

Insurance that covers your life for a specific term is called Term Insurance. The policy that you choose could vary from one year to ten years. You could also call it as a temporary cover since it must be renewed at the end of each period. No cash value accrues at the end of the period and the insured does not get any benefit if he is alive at the end of the term. The policy holder must renew his policy after the expiry of the tenure. Similar to other insurance plans, term insurance pays the sum insured to the nominee or the beneficiary on the death of the insured.

It would be advisable to go in for term insurance when you are in the prime of your life. When you are young, you do not have financial burdens and you would be in a position to pay the premiums quite easily. The younger you are, the healthier you are and the lesser would be your premiums. These plans are also used to serve as cover for mortgage loans or home loans.

Most of the time people go in for life coverage as all their plans go awry and do not quite go their way. One of the reasons that many people opt for term is its low cost factor and what appeals to them is the convenient monthly premiums. Another reason is that insurance seems a good way for people without much resource to make good financial planning for their family members.

Advisors are not very keen on term plans as they earn lesser commission as compared to regular policies. It is, therefore, advisable to choose your advisor or agent very carefully – some one whom you can trust implicitly. You could choose an advisor who has been referred to you, rather than choosing him randomly.