Death is something that we have very little control over. We cannot change when or how it happens, but something can be done to help the loved ones left behind.

Having term life insurance can help loved ones cover funeral expenses, debts, and other financial responsibilities that you may have even after you are gone. While nobody wants to think about dying, having this type of cover does provide some peace of mind.

Term life insurance or pure life insurance is a type of insurance plan which ensures payments for certain death benefits when the policyholder dies. These payments are only guaranteed as long as it is in the stated time frame.

South Africa has several good life insurance providers to choose from and when comparing life insurance quotes, it can be overwhelming. Luckily, this article has everything you need to know about term life insurance to help make this decision easier.

How Does Term Life Insurance Work?

Term life insurance is a contract between the policyholder and the insurance company. This type of contract only exists between a specified time, in which the policy policyholder agrees to pay an amount during this period. If the policyholder dies during this limited time period, the insurance company will make payments to the policyholder’s designated beneficiary.

However, if the policyholder lives past the specified term of this policy, the contract will end. This means there won’t be any coverage past the predetermined period.

When the money is returned to the policyholder of a return on premium life insurance, it is not taxed. But in some cases, the insurance company may make an agreement with the policyholder to move them to a whole of life insurance policy.

Term Life Insurance vs Whole Life Insurance: What’s the Difference?

The two popular types of life insurance are whole life insurance and term life insurance. Unlike term life insurance, which has a specified time period covered, whole life insurance provides coverage for the client’s entire life or usually until they reach the age of 95.

Another difference between these two types of life insurance policies is the payout. Whole life policies ensure payouts if the policyholder passes away or chooses to terminate the policy.

However, if the policyholder decides that they do not need a life insurance policy and chooses to get their cash back, the payout will be less than what was paid by the policyholder. On the other hand, if the policyholder cancels their policy with term life insurance, they will not receive any payouts, and you will no longer receive any death benefits.

Advantages of Term Life Insurance

One of the main reasons people decide to get life insurance is because their loved ones will be taken care of financially after they are gone. While this is a significant benefit of having term life insurance, this type of life insurance also has other benefits:

1.   Affordable

Term life insurance is one of the most affordable life insurance options. Insurance companies usually determine the policyholder’s payments based on their age. This means the younger you are, the less you will have to pay for this type of insurance plan.

Even though the payments may be low, their beneficiaries will still receive a high payout if the policyholder passes.

2.   Multiple Death Benefits

Even though term life insurance is one of the cheapest life insurance plans, it still covers a wide range of death benefits. The beneficiary will receive monthly payments to cover the financial responsibilities of the policyholder. There are also a few added benefits to this policy such as funeral cover support.

3.   Easy to Understand

Unlike other types of insurance plans, term life insurance is quite simple and easy to understand. This insurance plan has specific parameters, including a predetermined time of the policy and exact payment amounts.

This makes it easier for individuals who are looking for insurance plans to compare these policies from different insurance companies.

Disadvantages of Term Life Insurance

While several benefits make term life insurance the best type of insurance for some, there are also a few disadvantages that should be considered, like:

1.   No Coverage When Term Period Ends

If the policyholder outlives the specified time period of the policy, this means they will no longer be covered. Meaning that their beneficiaries will not receive any death benefits after the policyholder has passed. Which is why it is important to find a life policy that has a suitable time range for you.

2.   Expensive For The Elderly

Term life insurance may be the cheapest option for younger individuals, but the older you are, the higher your premium. This is why older individuals usually prefer other types of life insurance over term life insurance.

3.   Policyholder Does Not Receive Any Payments

Policyholders are aware that the purpose of term life insurance is to ensure that their financial responsibilities are covered once they pass. The policyholder will never be able to enjoy the money that they have paid for this plan themselves. If the policyholder decides to cancel this policy, they will not get a refund of the premiums they have paid.

Final Thoughts on Term Life Insurance

While death can’t be controlled, term life insurance makes it possible to ensure that your family can be financially secure even after you are gone. There are several advantages and disadvantages of term life insurance policies.

Term life insurance is a great option, especially if you are young and looking for an excellent type of life insurance cover. If you are unsure about which life insurance company to go with, check out this guide on choosing a life insurance company to help make this decision. Don’t wait any longer, the sooner you get your life insured, the better.