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Advantages and benefits of a Term InsuranceBY: Deena David | Category: Business and Finance | Post Date: 2009-10-22
Life insurance is one of the most important investments for people around the world. This is because people sometimes like to know that their money is being put to good use ands they can earn an income from the money they have invested. This is the main reason for insurance companies converting the insurance plans into investment and insurance plans. The most common type of pure insurance plan is the term insurance plan.
In a term insurance plan, the insurance is only insurance, but not an investment. This term insurance is also usually called as plain vanilla insurance. The insurance of a particular person is done for a particular period of time and when the time period of the insurance is over, the insurance is void. If any risk occurs to the individual during the time of the insurance, then the amount to which the person was insured is paid to the nominee. There is no plan of investment in the term insurance.
In other types of insurances like the Unit linked insurance plans, the insurance is linked to the equity market. The link to the equity market is to provide an income to the person who is insured by linking the premium paid to the equity market. The people who invest in these kinds of insurance plans fail to understand that the amount of money they pay to be a part of these insurance plans are much more than the money they pay for a term insurance and the returns are not guaranteed too.
The major advantages of a term insurance are:
1. It is not as complicated as other types of insurance:
Term insurance is the simplest insurance plan. The money paid as premium is only taken as payment for the premium and is not invested in any other place. This lack of investment makes the term insurance simple. Since there is no investment in other financial instruments, it is less confusing for the investor and they are able to track their insurance easily.
Compared to the other types of insurance, the term insurance is very simple. This is because of the fact that term insurance only consists of the premium paid for the insurance and there is no extra money paid for the sake of any investments. This insurance can be obtained at a very less premium. The companies only charge the service charge fees and the minimum amount as premium for the insurance.
3. Convertible into other types of insurance:
Another important advantage of a term insurance is that because it is a plain vanilla insurance, if the person who is insured suddenly decides to change the term insurance into any other type of insurance, almost all insurance companies allow it. This is because the plain insurance can easily be converted into a complicated one that has more potential to earn profit for the insurance company. This is the main reason that changing a term insurance into other types is possible and is an advantage of this ype of insurance.
These are the many important advantages and benefits of using a term insurance for the purpose of insurance.
Article Source: http://www.saching.com
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