Term life insurance is often called insurance in its most original form. Insurance means to pay for protection for an unexpected tragedy and that is exactly what term life insurance does. While other types of insurance do little “extras” here and there – like investment and additional coverage – term life insurance covers you for a specified purpose and nothing more. It also does not link to any investment asset so is free of any investment risks.
Now, the question is if there are other more lucrative policies available, why one should go for term life at all? The answer lies in the fact that the prices are lower in comparison to whole or universal life. In term life insurance, benefits are paid only in case of death that occurs within the stipulated term and that too if the policy is in force. Besides, as there is no cash value of the policy there is no investment risk involved for the insurer and so they can afford to keep the prices down.
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Buying term life insurance is best if you have very specific purposes for it. For these, there are various types of insurance available in each insurance firm. Some of the more popular ones include:
1. Children’s college education – this requires some accurate calculation of years to ensure that the policy
2. Credit management – such as paying off student loans
3. Auto insurance – which protects you in the event of an accident in a vehicle driven by you. Sometimes, it is replaced with accident insurance which, as its name implies, compensates you in the event of a motor accident.
4. Fire insurance
5. Household insurance – similar to property fire insurance mentioned earlier but is more comprehensive to include damages caused by theft (or attempted theft). This can be extremely helpful to reinstall home grilles and/or burglar alarms.
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