What is Term Life Insurance?
There are so many companies now offering products such as term life assurance (Risikolebensversicherung) and car insurance comparison (Autoversicherung Vergleich) online, that knowing you are getting a good deal on a product can prove tricky.
The trick to getting the right cover is to understand the product you are buying. Life insurance can be divided into two distinctive categories, temporary life insurance and permanent life insurance. Temporary life insurance is also known as term life insurance, and is a purely protective kind of life insurance. Apart from their division into temporary and permanent categories, the other major way to categorise life insurance is based on whether they are protection or investment policies. Life insurance that can be used for investment includes all permanent policies that facilitate the growth of capital and allow the contract owner to withdraw money from the contract prior to the death of the insured person. Term life insurance can be contrasted with permanent investment policies easily, as these kinds of contracts do not accumulate a cash value and are designed simply to provide financial benefit to a designated beneficiary at the time of death of the insured person.
Types of Term Insurance
There are a number of factors to be considered in any term insurance policy, including the amount of the death benefit, the amount of the ongoing premiums, and the length of the coverage. Most life insurance companies sell term insurance in a variety of different combinations, depending on the face amount, the period of the term, and the price of the ongoing premiums. For example, one common type of term life insurance is known as level term insurance, which has a fixed premium for a specific period of time that is longer than one year. At the end of the specified term, these kinds of policies often contain a renewal or conversion option, and some companies offer a guaranteed renewal of the same policy for the same or a different period.
Another kind of term life insurance is known as annual renewable, a one year policy that has a guaranteed renewal for a policy of equal or lesser amount. Mortgage insurance is also a form of term life insurance with a level premium and a declining face value. Mortgage insurance is designed so that the face or death amount is equal to the amount of outstanding mortgage on a specific residence, which is a way of guaranteeing that a mortgage can be paid if the insured person dies in the meantime. Term insurance is a common type of life insurance all over the world, designed as a protection based form of insurance and setup for a temporary and fixed period of time.
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