financialtreat – will explain about Get to Know More About Term Life Insurance which you will get in the following article. let’s look at this article carefully!
Term life in life insurance or term life insurance is one type of life insurance. In Indonesian, this insurance is known as pure life insurance. This type of life insurance is less popular.
This is because the premium deposited will not be returned when it is due. The coverage of this term life insurance itself will only be given to the heirs if the insured dies within the insurance period.
Get to Know More About Term Life Insurance
Definition of Term Life Insurance?
Term life insurance or term life insurance, as the name implies, is a type of insurance that provides protection within a period of time. The concept is: The insurance company will pay the sum insured if the risk of death occurs to the insured while the insurance is still running.
Meanwhile, if you have a long life and are past the insurance due date then there is no return. Whether it’s the sum insured or the return of premiums. This happens because in term life insurance there is no element of savings or investment. As is the case with unit link life insurance which is more popular in Indonesia.
If there is no return of the premium, alas, right, the money? Such a concept of thinking seems to have to be put off first. No return does not mean that you are at a loss. Because, there are several advantages of this type of insurance that will be very suitable for you and your family.
Characteristics of Term Life Insurance
There are several characteristics that you can know about this life insurance product. What are the characteristics?
1. Have a certain period of time
The most distinguishing thing between term life insurance and other insurance is that there is a certain period of time for the coverage period. For example, if someone takes this insurance product for mortgage purposes, then the length of time the premium that needs to be paid certainly follows the repayment of the home loan.
2. Relatively low premiums
The payment of life insurance premiums in this certain period of time has a relatively low premium depending on the amount of the sum insured given.
3. The policy can be extended or renewed
Because it is limited by time, it is still possible for term life insurance to be extended or renewed on the agreement of interested parties.
Benefits of Term Life Insurance
Term life insurance products also have many benefits for their customers. Here are some of them:
1. Providing financial protection to the family of the insured or heirs
Life insurance certainly provides a sense of security to the family of the insured or heirs. Especially from the financial side. Because if the insured is the sole breadwinner in the family, it will prevent the family from temporarily losing their livelihood.
2. Minimize bad debts
In Indonesia, we often hear about cases of bad debts or a party failing to pay off its debts to creditors. Life insurance can be used to minimize such incidents, if it happens to creditors or debtors.
3. Helps manage long-term funds
If you have long-term plans from a financial point of view such as children’s education, old age insurance and setting up a business, then life insurance is very useful to help you manage funds in the long term.
So, you no longer need to bother setting aside personal money for these three things to meet the needs of you and your family in the future. Simply pay a premium and focus on what you want to achieve.
Why Do You Need Term Life Insurance?
There are several things from term life insurance that will be suitable, especially for those of you who are married. The following is an explanation of the advantages as well as the characteristics of term insurance that you should know:
1. The coverage period is limited but…
The coverage period for term life insurance is limited, usually only one year and a maximum of 20 years. Meanwhile, another type of insurance, let’s call it whole life, provides a coverage period up to the age of 99.
It’s not that we don’t want to live a long life. However, according to BPS (Central Statistics Agency) it shows that the life expectancy of Indonesians is around the age of 69 years. Not only that, but over your 60s, your children are actually already earning.
For your information, the longer you pay the premium, of course, the greater the amount you have to pay, right? Meanwhile, with a shorter duration, of course you pay a premium with a smaller total. Well, instead of spending a lot of money on coverage periods that are actually not so necessary, then term life can be an alternative.
2. Term life insurance premiums are usually lighter than other life insurance
The short coverage period also has an impact on lighter premiums. In addition, because of this pure life insurance where part of the funds are no longer invested, it makes the premiums more affordable.
If someone says that unit-link life insurance provides a return at the end of the insurance policy period, the money is your own money. So, instead of you getting bogged down because of high premiums and finally can’t have life insurance, why not try other alternatives? Yes, this term life .
The low premium is especially suitable for you who are just starting a career. Or, for those of you who want to provide protection to your wife and children.
3. If you count it, it turns out that the money you will inherit is much greater
Term life premiums or term life insurance that are fairly affordable, it turns out to generate much more funds! How come? For example, you take term life with a premium of around RP5.6 million per year for 20 years. The sum insured offered is IDR 750 million.
If you count it, during those 20 years, you actually “only” spent IDR 112 million. Meanwhile, for unit-linked life insurance, with almost the same premium. For example, IDR 500 thousand per month. you have to pay for a lifetime. Which is usually with the provision of coverage age up to 99 years.
In fact, the average sum insured for unit-links is usually only around Rp. 250 million. The return on premiums generated from investment is actually uncertain. Because this figure will follow the development of investment which may increase or even decrease sharply.
That doesn’t mean unit-linked life insurance isn’t worth buying. However, if you want protection for your family but want lighter premiums then term life is the best. So, you at least don’t have to worry if you die. Because, your family will have financial guarantees.
Disadvantages of term life insurance
In addition to having advantages, term life also has disadvantages that you must know. for things will never go perfectly. this can prevent you from feeling a lot of disappointment if it is not as desired. here’s the explanation.
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Not Getting Cash Value
Perhaps this is the main drawback, because you will not get a premium refund if the term insurance contract is over. It’s the same with BPJS Kesehatan, as long as you are active you get protection, and if you are no longer active, the money that has been deposited will be forfeited.
In contrast to unit-linked type insurance which combines the benefits of protection with investment. But with a more expensive premium, because you will get cash value if the insurance contract has expired.
Premium not Flat
If whole-life insurance sets a fixed premium, it is different from term insurance. You will pay different premiums from year to year, following market value and inflation.
Premium per Year
Of course, you will feel objectionable to spending a large amount of money to buy this type of insurance every year, because there is only a premium option to pay per year.
Term Life Insurance Extension Is More Difficult
When your health declines and it happens that your protection has ended, then if you want to extend it, you must be able to pass the health test, while your condition decreases, it is very likely that your application for extending the protection of term life insurance will be rejected.
Why is that? Because the insurer will be at greater risk to pay the sum insured if the policyholder dies.
By only seeing a declining health condition, it is very likely that the policyholder will die during the protection period. Because generally at the time of renewal of this type of term life insurance, the customer’s age is old (seniors), above the age of 50 years.
That’s the explanation of term life insurance. Nowadays, for some people, insurance is a necessity. So it’s no wonder that many people have flocked to sign up. Before applying, it would be better to know what term insurance is all about? Hope this info helps.