LIFE INSURANCE

WHAT IS TERM LIFE INSURANCE?

Term life insurance is better understood as a life insurance policy that covers you for loss of life for a fixed term. A policy that is fixed term has a limited duration and once it has expired, it will be entirely up to you whether you want to renew your coverage or simply let it lapse. If you let the policy lapse, you will not be insured and your dependents will not receive a lump sum pay-out in the event of your death.

The cost of the premium you pay for your term life insurance policy will depend on a number of factors, namely your age, health and the life insurer’s determination of life expectancy (meaning, how long the insurer thinks you will live). The amount you will be covered for will be fixed at the beginning of the policy and will not change. It is important to bear in mind however, that if your policy is for a fixed term and you decide to renew when it runs out, the premium will be recalculated based on your increased age and will therefore cost you more.

TERM LIFE INSURANCE

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF A TERM LIFE INSURANCE POLICY?

The advantages of a term life insurance policy are that you will leave a cash sum to your family and dependents which will help them pay funeral costs, pay off a mortgage, or secure their financial position when you pass away. You have the certainty of the cost of your premium and the amount the policy will pay out, because these are fixed.

The main disadvantage of term life insurance is that if you die after the policy ends, there is no cash pay-out. In addition, as there is no investment component with a term life insurance policy, as there is with a whole life insurance policy, you will not receive any money back at the end of the term, no matter how much you paid in or for how long.

It is important to weigh up the considerations to take an informed decision.