Term Insurance

1. What is Term Insurance?

Term insurance is a life insurance policy that covers a person for a certain number
of years (i.e.the term) and pays the benefit in the event of death during the term.
Most policies also providepayment of the benefit in the event of permanent total
disability, usually over a number of installments.Unlike other life policies, the term
insurance policy does not provide any cash value ontermination of the policy
during or at the end of the term.The advantage of a term insurance policy is that a
person can buy a large amount of benefit foran extremely low premium and invest
the remaining savings in other types of investment to get ahigher return (compared
to a policy that provides a cash value).
2. What much insurance should I buy and how much is the premium?
If you have a young family with children, you need insurance for 5 to 10 years of
your income.You should be insured for up to 25 years or until your youngest child
reaches age 25. Forexample, if you earn $50,000 a year, you will need insurance
for $250,000 to $500,000.The premium rate depends on the entry age and the
period of insurance. You should pay $120 to$180 a year for $100,000 of insurance.
You should approach a few insurance companies to get aquotation and decide on
which company offers the best deal. If the difference is less than 10%,you should
be willing to pay more to get insured with a more reliable company.
3. Do I need to have insurance for critical illness?
You can buy critical illness cover for 1 to 2 years of your earnings. You do not need
to buy more,as you are already covered for a larger amount in the event of death.
You should pay $18 to $36a year for each $10,000 of insurance. This benefit is to
cover any loss of income during a periodof critical illness (that leads to a
recovery).The medical expenses for a critical illness can be covered under a
catastrophic health insurancepolicy, such as Medishield. This is explained
separately in a different article