What is Term Insurance?

Term insurance is a form of insurance which provides coverage for only a specified period of time. This period of time is known as the policy term. While most policy terms can range from 5-30 years, there are policies which cover up to age 99 as well.

If the insured passes away or triggers a claim during the policy term, the sum assured will be paid. If no claim is made within the policy term, the policy will cease once the term ends and nothing will be payable to the insured upon the end of the term.

Most term insurance policies are very affordable as they serve to provide protection purposes for a specified period of time and have no cash value. Thus, they are non-participating in nature and there are no bonuses accumulated or paid out. This is the reason why people do not get money back should they decide to surrender the policy.

The upside of such a feature and its affordability also means it becomes more flexible for the insured to surrender the policy if needed as there is usually no non-forfeiture option (options to prevent the policy from lapsing such as reduced paid-up).

Term insurance can be used as a form of temporary insurance when one is looking for coverage for a period of time or facing budget issues. It is also used as a part of a form of financial strategy known as "Buy Term, Invest The Rest". This will be discussed on a later date.

Features of Term Insurance:

• Covers life of the insured for a specified period of time.
• May include coverage for total and permanent disability and critical illnesses depending on the policy.
• Non- participating and thus has no cash or surrender value.
• Affordable premium amounts. Lowest premiums compared to other forms of life insurance.
• No non-forfeiture or policy loan options.