Term life insurance is the pure form of life insurance where the policyholder buys coverage for a specific period at a specific rate. In its true form, insurance is primarily used to circumvent the risk of a conditional loss. We knowingly incur a small and known loss (premium) to undermine a more devastating loss. Although some policies provide something extra like investment options, loan facility, term life does nothing of that sort. In term life, if the insured dies within the term, his beneficiaries will get the face value of the policy as death benefit and nothing else.

It is no magic that the term life insurance prices are low. The carriers do not have to take any investment risk on your behalf and so they cannot charge you for that. It also means that they have less paper work to do. Moreover, the claims are made very rarely and so they make a good profit, a part of which is paid back in the form of lower price.

Term life insurance is named so because it is valid for a set term. Some other insurance policies too are valid for a set term. They are not exactly life insurance because they do not cover your life, but only a particular aspect. Some of them are:
1.    Children’s Collage Education – It provides fund for your children’s higher studies
2.    Credit Management – It covers your loans
3.    Fire Insurance – Covers damage by fire
4.    Household Insurance – Covers damages caused by theft
5.    Medical Insurance – Covers all medical expenses

Term life insurance is pretty popular not just as a form of protection for specified purposes but also as a life insurance policy.  This is mainly due to term life insurance rates being much more affordable than ordinary insurance.

We have already discussed briefly, why term life insurance rates are so affordable. Let us take up the points one by one. Term life is valid for a fixed period. Claim is entertained if the insured dies within that period. Statistics have shown not many people actually die within that term and the carriers are not required to play claims in 99% of the cases.

Another reason is its low payout rates.  For any term life insurance, the chances of a payout are exceedingly small.  After all, it is almost impossible to predict that any mishap will happen duration the term of that insurance.  For many, it is many renewals later before a claim is made.  This low payout rate means less administrative costs and payouts for the insurance firm, which translates to secured finances within the company.

The term life insurance rates are low also because there is very little administrative cost in comparison to whole life or variable life. The latter categories have built in cash accumulation vehicles to force the insured to self-insure. This demands complicated administrative work, which in turn raises the insurance prices. At the same time, simpler administrative requirement means quicker release of benefits, if such a situation arises.

Term life may not have any investment opportunity; in fact, you may lose all the money you have paid as premium if you survive the term. Yet if you want to protect your family from future financial ruin in the event of your premature death without curtailing any major expense right now, it is the most effective tool to do so.  Buy term life at a reasonable rate so that the benefit they will get in the event of your death will see them through.

At the same time, you must concede that there is nothing ‘all good’ or ‘all bad’ in this world. Term life too has some negative points. You get no return from the money you have paid as premium if you do not die within the term. No request for refund of premium you have paid will be entertained. Secondly, you will be in trouble if you cannot calculate coverage years properly. The term life insurance rates increase with age. If you need further coverage, you will not only have to give proof of insurability, but may have to buy it at such a high rate that it may not be financially viable.

Buying coverage under life insurance no exam at an exorbitant rate is the only alternative left then. This may remind you of an old saying - you get what you pay for. You get limited benefits because you pay at a lower rate. If you die within the term, your beneficiaries will get the face value of the policy and not a cent more. Had you bought a whole life, which has higher life insurance rate you and your beneficiaries would have got more!

Delnaz Thompson owns an insurance business that deals primarily in life insurance. If you would like to get the most competitive term life insurance or to find out about the term life insurance, visit her site today.