Insurance Policy

Insurance is the concept of paying a certain amount every month in anticipation of a future difficulty like illness, personal injury, accident or death. Insurance has become an absolute necessity these days. With so many insurance companies providing so many different kinds of Insurance Policies and plans, policies are becoming more affordable for all kinds of people. Some kinds of insurance are mandatory, while others are optional.

Insurance can be meant for anything: life insurance, automobile insurance, health insurance, home insurance, property insurance, disability insurance, travel insurance, pet insurance, cycle insurance, recreational vehicle insurance, sports insurance and so on. There can be special policies like flood insurance, ski insurance, student's content insurance, long-term care insurance, flight, kidnap, extended warranty and others. In short, insurance can be purchased to cover any kind of a risk.

Insurance policies are plans that are provided by an insurer to the insured. The policy is a legal agreement by which the insured agrees to pay a certain amount as a premium to the insurer and the insurer in turn promises to cover any costs that may have to be incurred in the future for the particular person or object that has been covered by the policy. An Insurance Policy states the kind of premium to be paid, the coverage provided, the limits of liability, the policy limits, benefits, deductibles, term of insurance, and other factors.

When you approach an insurance company to purchase an insurance policy, the company gives you a quote that contains all the aspects like premiums to be paid, the benefits and so on. When you agree to the terms and submit the application, the insurance company reviews whether you are eligible to receive the insurance, and then insures you if found eligible. When the situation occurs for which you have taken the policy, you can approach the insurance company and file a claim to be paid for the expenses you incurred because of that situation.

Insurance can be purchased directly from the insurance company or through an insurance agent or broker. The main factors to be considered while purchasing insurance policies are: does the policy cover all the risks, are there any limits to the policy, are there any hidden costs and would the company pay for the claims easily. 

Term Life Insurance Policies 

The insurance needs of individuals are unique. Individuals with short-term insurance needs opt for term life insurance policies. Term life insurance policies are extremely affordable and have lower initial premiums in comparison to whole life insurance.
Such kinds of life insurance policies are popular among people who have a short-term requirement and endeavor to secure the financial future of their dependants for the duration that the risk exists. Since they are affordable, with low initial premiums, the lifestyle of the insured and his family is not compromised while making the payments.
One major downside is that in later years the premium become costlier and can be greater than the premium cost of whole life insurance policies. Term life insurance is completely protection-oriented. The beneficiary obtains the death benefit only in the event of the death of the insured within the specified time period. If the insured lives past the term period, not a single dime is given. There is absolutely no ingrained cash value or investment character in term life insurance policies. In case of an inability to pay premiums, or outright cancellation, the insurance policy becomes useless.
Most people fail to understand the logic of opting for term life insurance. Death cannot be predicted, and no specific date can be fixed for it; thus, there is a substantial risk of cash loss. However, for people with a great need for short-term coverage this is the most logical and affordable choice. In most cases, individuals with budget constraint find it difficult to get a whole life insurance policy. A person with young children, a car loan and a house mortgage opts for term life insurance for the duration when the need is substantial. Getting short-term insurance is a reasonable option when it is a ground for securing loans, or for completing a MBA degree.
There are basically two variation of term life insurance; namely, level term and annual renewable term (increasing premium) policies. Level term insurance policies have a more expensive initial premium in comparison to annual renewable term. Generally, after 5 years, the premiums are maintained at a cost-effective standard level. Purchasing a level term insurance for a longer duration (more than 10) is the best option in most cases. Annual renewable term insurance is like a pure term life insurance, apart from the fact that the premium rates keep increasing with each year of renewal. There is also another variation of term life where the initial premiums are high and they keep decreasing until the end of the term. Certain companies buy group term policies for their employees. However, these policies are only for the work period of the employees.
Many insurance companies provide the option of renewing or converting a term policy into whole life or universal policy, after the expiration of the term. However, both renewal and conversion premiums are often much higher. Certain companies require a repeat health examination during renewal, which may become grounds for refusing to provide insurance. Term life insurance, like any other insurance policy, has its own set of pros and cons. A policy should always be bought depending on its suitability to individual needs, and with due caution.