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Make Money with Term Life
-- Pushpa Sathish, Staff Writer
Term life is more affordable than all other forms of insurance – we all know that. People choose to go with a term life when they need protection for a certain period of time, when kids are in school or when you’re newly married and need insurance to tide you through tough times. Term life does not offer you a return on your investment, your money is not returned at the end of the term.
But here’s how you can actually make some money by investing in a term life policy – pay the low premiums and invest the rest of the amount (that you would have spent on a whole life premium). Insurance companies are conservative investors, so a whole life will probably return you less than your own investment.
Who Needs Term Life Insurance?
-- By Pushpa Sathish, Staff Writer
Term life insurance may not be the most sensible insurance option, especially for those who are looking at insurance as an investment. But there are situations where term life will work out better than whole life insurance policies which carry a much higher premium.
- Young couples who have a considerable amount of debt, and who absolutely need insurance, will find a term life insurance policy with a large benefit within their means, and able to meet their needs.
- Families that need insurance cover for a short period, under ten years or so, can opt for term life options. In this period, children live at home, and their needs have to be met. Once the fledglings leave the nest, the financial cushion can be reduced. Term life insurance policies offer the best short-term financial advantages.
- Couples approaching retirement with college-going kids and a mortgage will also find term life insurance policies that cover both attractive.
The best part of short-term term life insurance options is that these policies are convertible to whole life on cancellation. So once the family finances are doing reasonably well, and the household and academic expenses are considerably reduced, you can change your policy to the whole life option. But make sure such a conversion is possible when you first take out the term life policy.
Return of Premium Term Life
-- By Pushpa Sathish, Staff Writer
Term life insurance is not a very popular option simply because it makes death look like the best way to gain any return from your investment. Beneficiaries of a policy have to lose a loved one to gain monetary advantages from the deal.
But there is one term life insurance policy that offers a policy holder 100 percent of all premiums paid, even if he/she is alive at the end of the designated term – the Return of Premium (ROP) term life insurance. The premiums are a little higher than in a normal term life policy, but that’s just how the money is returned at the end of the term - the extra amount paid as premium is invested for capital growth.
The premium paid depends on the term of the policy, the longer the term, the less the premium. This makes sense since money grows more over a longer period of time.
Types of Term Life
-- By Pushpa Sathish, Staff Writer
When shopping for a term life insurance policy, bear in mind that there are three main kinds available:
- Level Term: While the death benefit remains the same for the full period of the term, the premiums stay the same for the entire period, stay the same for a certain period, or increase as the term goes by.
- Decreasing Term: The death benefit decreases as the term goes on while premiums remain the same for the entire term. This type of insurance is ideal for those who have financial obligations that decrease with the passage of time.
- Annual Renewable Term: The death benefit remains the same for the entire period of the term while the premiums increase gradually.
Terms of a Term Life
When taking out a term life policy, there are a few issues that need to be considered before you decide on the length of the term.
- Take stock of your outstanding debts and loans, and work out how much money your dependents will need to pay them off in the event of your death.
- Consider the number of years your children or dependents will take to become financially self-sufficient.
- Look at your financial needs and those of your dependents.
- And last, but certainly not the least, decide on your policy only after you have checked out various options.
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