For more than 90% of people who want and need life insurance, term policies are the best choice. Term life insurance is inexpensive, simple, straightforward, and allows you to protect your family from financial devastation in the event of your passing.
Buying term life insurance is easy
In the past, most people had to rely on a life insurance salesperson to walk them through the vocabulary, possible financial scenarios, and a lengthy underwriting process. These days, we can research nearly any subject with the help of the Internet.
Advanced technology allows insurance companies to lower their premiums, offer answers to all of their clients’ questions, and even provide world-class customer service through their websites. Getting a life insurance quote used to take days or even weeks. Now, it just takes a couple of minutes.
Term life insurance is a good deal
If you have debt, children, a spouse, or loved ones who would experience financial hardship as a result of your death, you need life insurance. Because this type of insurance policy is simple, it’s also inexpensive.
With a term life insurance policy, you’ll purchase a death benefit of a set amount for a certain number of years. For example, a 40-year-old father of two teenaged children with a stay-at-home spouse may want his partner to be able to pay off the family home, replace his income, and pay for the kids’ college if he dies. After calculating how much life insurance he’ll need, he may shop around for quotes on a $750,000 25-year term life insurance policy.
A term life insurance policy will provide for his family’s financial needs while allowing them to remain in the family home even if he dies and they don’t have his income anymore. This man is in good health and his premiums cost the family less than $50 per month.
Term life insurance defined
When you shop for term life insurance, there are two main terms you’ll frequently see. The beneficiary is the person or people that get the death benefit amount stated in the policy. As the policy owner, you’ll choose the beneficiaries of your life insurance.
There are no restrictions or laws about who you can name as beneficiary. In fact, you can choose an organization, business partner, or even a non-profit to get the money when you die. If you want to name more than one beneficiary, you can split up the money so that a certain percentage goes to each person or organization. You can also name a single beneficiary with alternates on the policy in case your first choice can’t receive the death benefit for some reason.
It’s a good idea to at least choose one back up beneficiary in case your first one dies before you. If that happens, the state will have to step in and make decisions about who will get your life insurance money.
The death benefit is the exact amount of money that your life insurance company will pay your beneficiary if you die while the policy is in force. You’ll decide how much of a death benefit you’d like to purchase when you shop for a policy. There are a lot of ways that people decide how much life insurance to buy. It depends on how much debt you have and what you want your life insurance money to cover after you die.
Term life insurance has the lowest premiums
How much you’ll pay for your term life insurance policy depends mostly on your age, health status, and how much money you want your beneficiaries to get when you die. Of all the types of life insurance, term is the cheapest.
People who decide to buy a term life insurance policy while they are healthy and young may pay only $25-$50 per month in premiums for a sizable policy amount. Other types of life insurance are more expensive.
Since you can have multiple life insurance policies, some people choose to buy only the amount they need during certain times in their life. For example, a woman in her 20s who just graduated from college takes out a 10-year $100,000 policy and name her parents as beneficiaries. This amount would easily cover funeral expenses and pay off her debts if she died.
She marries at age 27 and she and her husband each buy a $250,000 term life insurance policy. If one of them dies, the surviving spouse can pay off their $200,000 mortgage and cover burial and funeral expenses. Since the home loan is for 15 years, the couple chooses a 15-year term for their life insurance policies. The $100,000 policy the woman bought at age 24 expires at age 34, which is fine because she’s since replaced it with a larger policy. By the time the house is paid off, the couple plans to have enough money in savings to pay for funeral and burial expenses themselves if one of them dies.
Because premiums for term life insurance policies are so low, it’s easy to get the coverage you need for all phases of life.
Term life insurance is the simplest of all life insurance policies
When you buy term life insurance, you choose the amount of money your beneficiary gets when you die and you choose the amount of time you want coverage.
If you die during the “term” of the policy, your beneficiary gets the money. If you outlive your policy, it simply expires. Permanent life insurance has a savings component inside the policy that gains some value as time goes on. You can take out a loan against the policy’s value or cash it in after a certain amount of time passes. Because of these additional options, permanent life insurance is much more expensive than term life insurance.
Term life insurance isn’t an investment. The straightforward nature of the policy means that it is only good for one thing and that’s providing a death benefit to your loved ones in the event of your death.
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