Term Insurance Basics

Study Notes

Overview of Term Insurance

Provides temporary life insurance protection for a specified period known as the policy term.
Two classes exist: coverage against death only, and coverage against disability and death.

Policy Terms and Conditions

Benefits are payable only upon death or total permanent disability during the policy term.
Policy term can vary, typically ranging from 1 to 20 years, or expiring at a specific age (e.g., term to age 70).
Coverage expires on the anniversary closest to the insured's 70th birthday or upon reaching age 70.

Structure of Term Insurance

Can be issued as a basic cover or as a rider on an existing life insurance policy.
Sum assured usually remains level throughout the policy period.
Riders provide additional benefits beyond the basic policy.

Premiums

Premiums are level during the term but may increase upon renewal due to the insured's age.
Single premium payment options are available, where the entire premium is paid upfront.
No benefits are payable if the insured survives the policy period.

Key Advantages

Simplest form of life insurance, offering high cover at low initial premiums compared to other life insurance types.
Younger insured individuals usually benefit from lower premiums.
Non-participatory, meaning it does not share in the insurance company's profits and has little or no cash value.

Utilization of Term Insurance

Ideal for individuals seeking high insurance coverage at affordable premiums.
Suitable for protecting financial loans or mortgages.
Provides insurance for business investments during growth phases.
Safeguards against the loss of a key employee in a business due to untimely death or disability.
Used to ensure continuity of children's education during critical financial times.
Can supplement existing policies to enhance coverage.

Additional Features and Riders

Options to include riders that offer diverse benefits such as:
- Participation in the insurance company’s divisible surplus.
- Disability benefits.
- Medical and critical illness coverage.
Features include options for sum assured adjustments, renewal, and conversion of terms.

Description

This quiz covers the fundamentals of term insurance, including its purpose, types, and policy terms. Understand the differences between death-only coverage and disability and death coverage. Test your knowledge on how term insurance works and its benefits.