The basic principles of term life and whole life insurance are similar, except that in term life insurance, the policy is valid for a fixed period of time. The term of the policy is short, either one or two years. The advantage is that the rate of premiums in a term life policy is much lower and is unlikely to change in the short time of the currency of the policy.

Three factors are to be considered while opting for a term life insurance policy. The first factor is the premium –it remains steady even in the face of a severe recession.  The second factor is the payout, or the amount the beneficiary will receive in the event of the death of the policyholder. It may be mentioned here that the payout is not much, considering the low rate of premium that is paid for the policy. The last factor is the term of the policy or how long the life insurance coverage will last. Although the term life insurance policy may last only for a year or two, the policyholder has the option of extending his policy after the expiry of the current term.

A term life insurance policy is a good way to protect your family even though you have no budget to spend on insurance. However, you must keep in mind that a term life insurance policy will pay out only on the death of the policy holder. In other cases, the policy just ceases and there is no payout or a refund of the premiums paid. Yet this is a small price to pay for protection if you can get a customized term life insurance policy to suit your needs.