Picture a world without you. Does your family need assistance paying the bills? A life policy can ensure that the most urgent financial needs of a family are met even if the primary caregiver is unexpectedly absent. Term life insurance proponents believe it’s the perfect choice due to its competitive price and comprehensive coverage.
If you die while the policy is in place, you will leave behind a large sum of money for whoever you want. As the name suggests, term life insurance is a policy that does not last forever. Term life insurance is an excellent choice to buy if:
- You want low premiums followed by a big payout when you die.
- You want to cover costs that end, such as paying off your home or sending your children to college.
In this article, we will take a closer look at term life insurance. Is life insurance worth it? Yes it is, continue reading to learn more about term life insurance.
What is Term Life Insurance and How Does it Work?
Term life insurance is an agreement between you and an insurance provider that lasts for a fixed period of time – 10, 20, 30 years in most instances. If you die while your policy is active, your beneficiary receives a payout.
When applying for a life insurance contract, you must pick an initial term for your policy. Your term is the period that your insurance policy is active. Consider this case, if you buy a 30-year term life insurance policy with $250,000 of coverage. This means that your policy will be in place for 30 years from the first month you pay for your insurance. If you die within 10 years, your beneficiary will receive the $250,000.
Your beneficiary might be your kids, your spouse, other family members, a business partner or even a charity. Also, you can have more than one beneficiary on your policy. Furthermore, your recipient might get a payout as a large sum, or in a series of term life insurance payouts. In case you do not die during the duration of your policy, your insurance policy will expire. Therefore, you will not receive any benefit.
In addition, your beneficiaries can use your death benefit in whatever way they want since there aren’t any restrictions. Many recipients use the death benefit for a mortgage, living cost and funeral expenses. When you have more than one beneficiary, you can decide how you’d like to split your death benefit into your will.
Who Needs Term Life Insurance?
If you have loved ones who rely on you financially, such as kids, parents, partners or siblings, term life insurance may be a perfect choice for you. If you are a stay-at-home parent, you will want term life insurance to cover services that you already provide without charge like child care. If you are the provider in your family, you can pick a term that suits the years your family will depend on your income, for example, the remaining years you will have home loan payments.
Over time your needs will adjust. If you expect this to happen, you should get more than one life insurance policy, offering more coverage at lifetimes when you desperately need it. Ideally, you will no longer need life insurance by the time your coverage expires. Your kids will be grown, your loan will be paid off, and you will have enough savings to be financially stable.
If you purchase a term life insurance policy and then decide that after all, you need whole life insurance, several policies would allow you to change your term life insurance policy to lifetime insurance. Your premiums will go up, but you will remain covered without having to prove that you are still in excellent health. Additionally, several policies require conversion at any time while others require conversion in the first few years of coverage.
Reasons to Purchase Term Life Insurance
Not sure whether you need a life insurance policy? Here are some reasons to get a term life insurance policy:
- Term life insurance policies are affordable for most people to afford – for example, you can buy term life insurance for as little as $20 per month.
- Term life insurance can give you peace of mind – would your family need help paying the bills? Would your children be able to go to college? With term life insurance, you won’t have to think about these kinds of things. Since your insurance policy will give a death payout to your family to help cover the expenses.
- Term life insurance policy has no limit on the use of the death benefit. Unlike other forms of insurance, such as mortgage payment insurance. There aren’t any restrictions on how your beneficiaries can use your death benefit.
How Much Term Life Insurance Do You Need?
It can be challenging to find out just how much life insurance you need. Especially finding out how much money your dependents will need to keep up with their existing living standards if they lost your support. You might consider unpaid loan balances, monthly bills and your children’s college plans. Therefore, the amount of coverage you need depends on several factors, as stated above.
The Cost of Term Life Insurance
The cost of buying a term life insurance relies on several factors such as:
- Age – younger citizens, are eligible for lower premiums since they are less likely to die.
- Gender – Men usually die at younger ages than women; therefore, men mostly pay more for term life insurance.
- Health – most insurance companies require you to take a medical exam. Poor health can mean increased premiums.
Here is what you might expect to pay for a term life insurance policy (20 or 30 years):
Average Annual Term Life Insurance Rates for Women
Average Annual Term Life Insurance Rates for Men
The Best Term Life Insurance
Here is a list of the best term life insurance policies of 2020:
- State farm
- New York Life Insurance Co.
- Northwestern Mutual
- John Hancock
- Lincoln Financial Group
How to Find the Best Term Life Insurance Company
When you purchase term life insurance, you are relying on a firm to be there for your family for several years in the future. So for that reason, it is necessary to select a company that you can trust.
Here are several ways of comparing firms and choosing the one that suits you:
- Search for companies that have “Great” ratings to guarantee maximum experience.
- Research the insurer’s reputation for customer service.
- Look up the insurer’s financial strength – this will reassure you that the insurer will compensate your beneficiaries.
- Understand well the policy features you desire. Do not just go with any unsure policy; choose the one that will suit your beneficiaries.
Is Term Life Insurance Worth it?
Term life insurance is simple, straightforward and affordable. Besides that, it does not come with an investment opportunity. Therefore, you will not incur extra charges. For breadwinners, especially those with lots of debt and a growing family, term life insurance policy offers an affordable way to keep your family safe.