People, particularly older generations, subconsciously link ‘Insurance” to ‘Savings. This misconception could be caused by the way tied agents solicit their business. Agents sell whole-life plans as savings plans. While this is not to say that whole life plans cannot be used for savings, it does illustrate the misinterpretation of ‘Insurance with Savings’. A contributing factor could also be poor marketing and inaccessibility of pure insurance plans in the early days.
While traditional products are still more sales-oriented than newer models, they are being replaced by business models that focus on the customer and offer financial planning and total risk solutions.
Insurers are driven by competition to invent and develop new products to complement their existing product lines. One of these is the Term plan.
Protection Solution-Term Plan
Term insurance can be described as a simple financial protection tool. The consumer decides the amount of protection they want and how long. Consumer will then pay a premium to the insurance company who honors that agreement.
Consumer may also choose to add life insurance, including critical illness, disability, and personal accident benefits. If any of these events occurred during the coverage period, the consumer will be paid. As long as the policy remains in force, the coverage is guaranteed. The premium is paid by the insurer within the grace period.
Term insurance does not have any cash value. It is only intended to provide protection. Some insurers will return any premiums paid at the expiration of the coverage at a higher price.
Some companies offer the option to renew the policy at the end of the term. This allows the policy owner, but at a higher premium, to keep the coverage. The renewal age will determine the premium.
Term insurance is an affordable way to increase your coverage. You only pay for what you use. For example, if a 30-year-old male needs $500,000 coverage over 25 years, his premium would be calculated using the average insurance rate between age 30 and age 55, instead of until age 99. This is how the whole life plan works.
Evolution of Term Insurance
A Term plan offers greater protection. It covers critical illness, disability, and multiple claims for major critical illnesses. You can find a female-related critical illness plan on the market by using some marketing packaging for early stages critical illness plans. This can be used as a standalone plan or as a rider for another term or whole-life plan.
A term plan also includes mortgage insurance. The benefit amount of this type of term plan is affected by the mortgage interest over the life of the mortgage loan. Insurers have been able to waive premiums in recent years because the benefit amount has dropped so much over the past few years.
Who is Suitable
Individuals who need temporary, high-quality protection with a low premium can choose to purchase term insurance.
i.e. If the spouse dies before the mortgage is paid off, the breadwinner will leave a lump sum and a monthly allowance to the family.