Term Insurance and Annuities

Term Insurance is the simplest and most affordable form of protection plan. The benefit of term insurance is paid out when an insured event is occurs. It usually costs less than whole life insurance and endowment insurance policies for the same level of coverage. There is no savings or investment feature in term insurance. There is no cash value when the policy ends or is terminated prematurely. The coverage provided by fixed or level term insurance remains the same throughout. In decreasing term insurance, the coverage will reduce over the years and become zero by the end of the term. This is commonly used to cover housing loans. Term insurance may have convertibility and renewability features. When considering term insurance, choose the term you want carefully. If you choose too short a period, your dependents will have no coverage to benefit from after the term expires. If you want to buy another term insurance policy after the first one has expired, you will be subject to medical examination. The premiums will also cost more due to increased age. So, it is increasingly costly to purchase term insurance policies over time. Consider buying a term insurance product for a longer period of coverage when you are younger. Do pay premiums on time. If the policy lapses, a reinstatement of policy will require you to prove that you are still healthy.

An annuity is a type of insurance policy which guarantees fixed payments at regular intervals, for as long as the policyholder lives or for a fixed period of time. Annuities are usually purchased to provide for retirement income. Premium is usually payable as a lump sum but there can also be regular premium payments for an agreed time period. When considering annuities, consider the financial strength and soundness of the insurance company and the returns it has paid out in the past. This serves as a guide but do know that past performance may not indicate future performance. An annuity is an instrument that is usually used to hedge against longevity.

Click here for government certification in Accounting, Banking & Finance