Term life insurance in depth

Thursday, June 01, 2023 05:00 AM - Comment(s)

Term life insurance in depth

What is term life insurance?

Term life insurance is typically the most affordable option to protect your family in the event that something happens to you. It’s a policy that covers you for a specific amount of time, or term — typically 10, 15, 20 or 30 years. You make premium payments during the term you’ve selected, and your insurer will pay a death benefit to your beneficiaries if you pass away.

Why term life insurance?

Term life insurance tends to be a more affordable policy than permanent life insurance because it doesn’t build any cash value that you can borrow against or invest and it ends at the term of your contract instead of providing lifetime coverage.

Select the duration of your coverage

Decide the number of years your financial needs will be greatest (for example, when your kids are younger or while you’re paying a mortgage).

Determine how much you need

Think about how much your loved ones may need to replace your income. This could also include the amount needed to pay off a mortgage, save for college tuition, or cover debts or final expenses.

With a term life insurance policy, you pay fixed premiums for the term you’ve selected to be covered. Your monthly payments will stay the same throughout your premium period. If something were to happen to you, whoever you choose as your beneficiary will receive the tax-free death benefit.

Who may need term life insurance?

Term life insurance may be a good option if you have people (or even pets) who depend on you financially. You may want to purchase a policy that will correspond with how long they’ll be dependent on you — for example, if your children are young or in college. The tax-free payout can help provide financial stability for your family. They can use this money to replace lost income, maintain a certain lifestyle and pay off any outstanding debts such as a mortgage.

And keep in mind that wage-earners aren’t the only people who may need coverage. Stay-at-home parents provide child care that would need to be replaced if something happened to them. So, as you’re considering your needs, it’s important to take these expenses into consideration, too.

How much does term life insurance cost?

The monthly cost for term life insurance will vary based on your specific situation. For example, the younger you are, typically the lower your premium will be as you are less likely to pass away before your term ends. Women also tend to pay less because on average they live longer than men. How healthy you are is also a factor in your cost.

Advantages of term life

It can provide financial protection for your family.

It’s typically less expensive than other life insurance options.

The younger you are when you purchase life insurance, the less expensive it typically is.

Disadvantages of term life

It covers you for only a specific amount of time, not for your entire life.

Once the term ends, the coverage ends or the premiums increase dramatically.

The older you are when you purchase coverage, the more expensive it gets.

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