What is Term Life Insurance?

Term life insurance provides cost-effective, guaranteed financial support for your beneficiaries in case of your death within a specified term.

Term life insurance definition

Term life insurance offers a total payout to beneficiaries in case of the policyholder's passing during a specified term, or if they become totally and permanently disabled (TPD).

How does term life insurance work?

Term life insurance offers a guaranteed payout (death benefit) to your beneficiaries if you pass away within a specified timeframe (the term).

Policyholders pay premiums throughout this period, with the option to renew, convert, or cancel the policy at the end of the term.

If the term expires without a death claim, coverage ceases, and no benefit is paid.

Term life insurance benefits

Below are some advantages for term life insurance policyholders.

Affordability

Term life insurance offers the most cost-effective death benefit coverage due to its focus on a specific term.

Flexible tenure

You can choose the coverage period that best suits your needs. This can be 20 years, 30 years, and so on. A flexible tenure also means that you’ll be able to cover yourself and your family for a set period. For instance, parents might decide on term life insurance to ensure that their children are covered until they are independent.

Customisable

Insurance riders such as medical, critical illness, accidental death and disablement, temporary disability, and mortgage can be added to the policy according to your requirements.

Convertible

Some policies can be converted to whole life insurance. This means you’ll be able to choose to be protected longer. However, there might be additional fees or increases in premiums. Nonetheless, having this option may come in handy should you need a longer coverage period.

Easy and hassle-free

Term life insurance is straightforward to apply for and easy to understand. Just be sure to read the terms and conditions of the policy so that you’re aware of the coverage provided.

Which is better, whole life or term life insurance?

When it comes to life insurance, a pertinent question that many people ask is whether term life or whole life insurance offers more benefits. Let’s have a look:

Premium cost

Term life insurance typically has lower premiums compared to whole life insurance. As such, it’s a good option for those who are on a tighter budget.

Renewability

Term life policies can often be renewed, but premiums may be revised with age.

Investment value

Whole life insurance builds cash value over time, while term life does not.

Personal needs and preferences

Whether an individual needs term life or whole life insurance depends on their financial goals and coverage needs.

Thus, the answer to which is better often depends on one’s preference, family obligations and insurance requirements.

How much term life insurance do I need?

To estimate the amount of term life insurance you need, consider using a multiple of your annual income, typically 10 to 15 times. This helps ensure your dependents are financially secure, covering debts, living expenses, and future obligations like education costs.

For a more accurate estimate, factor in specific financial responsibilities, outstanding debts, living expenses, and future obligations for your dependents.

What happens to term life insurance at the end of the term?

Term life coverage ceases after the policy term expires, with no death benefit payout.

Can you cash out term life insurance?

Term life insurance focuses on death benefits and has no cash value.

Where to get term life insurance?

Prudential offers PRUTerm, basic life-term protection with affordable premiums, paying a lump sum to your beneficiaries in the event of death or total and permanent disability.

The coverage can be enhanced with add-ons for critical illness, accidents, and hospital bills. The plan is available for individuals aged 16 to 65, with coverage lasting up to age 70.

Conclusion

Term life insurance offers an affordable safety net for your beneficiaries, ensuring they are cared for if the unexpected happens. Choose a coverage term that matches your financial obligations for peace of mind.