Why Families Shouldn't be Without Term Life Insurance
If you’ve got a family, life insurance should be a priority. Here are five reasons why:
1) Term life insurance is cheaper than whole life or other types of permanent coverage. You can get term coverage for as little as $7 per month for an adult with no medical history and the cost goes up from there. Compare that to whole-life premiums which can cost upwards of $500 per month!
2) The unfortunate truth is that we don’t always know when our time will come so it’s vital to financially prepare for any day with no notice so your family isn’t left in financial ruin.
3) Since death and taxes are the only two certainties in life, it makes sense to prepare for them by purchasing term life insurance.
4) Term life is valuable when you need to borrow money from your family. A person can’t always afford to pay back a loan on time but if the loan was with life insurance then your family will not have to pay anything out of pocket if you die before repaying the loan.
5) If you don’t have any children or grandchildren, term life insurance can be especially valuable for your spouse or significant other because it provides benefits that powerful financial incentive of cash-in-hand death benefits .
So even if you are on a budget, term life insurance should be considered. It can cost you a few extra dollars a month for peace of mind about your family's future. The money spent annually on term life insurance is far less than that spent on the average funeral and grave maintenance (about $6,000 per year). There are also additional ways you can reduce the cost of your life insurance if you have a low income. For example, a $5,000 death benefit can be had for as little as $15 per month. If you want to read more about ways to reduce the cost of your life insurance premiums, please read this post .
If you do have a few extra dollars lying around, it’s probably better to invest in whole-life or universal coverage.
If you are still unsure about term vs. whole-life coverage, please read this article .
Current Life Insurance Rates: Term Life (30 year term)
Term life insurance is the best deal in the insurance market and it's especially great for families. Term life insurance rates are low because the companies know that people are not likely to file a claim with short-term policies. There are no deductibles or annual fees associated with term life, so you really can’t beat the price. For example, we recently reviewed a family of four with two adults and two young children who needed $100,000 each in coverage for 30 years. I did a quick check with an independent life insurance brokerage and we were able to find a company offering term life insurance at the $7 per month price for a 30 year term. It would have been hard to find a less-expensive rate!
We are currently paying $2,000 per year in term life for our family of four. If we need more coverage but don’t want to pay the higher cost of whole-life or universal coverage, I will definitely switch from term life to whole-life or universal coverage later on so that we can get the best possible rate. Universal coverage is expensive and it doesn’t really offer any benefit compared to term life, but it will always be cheaper than whole-life.
Here are some important things to keep in mind when buying term life insurance:
No medical exam - You don’t have to take a physical to buy term life. If you cannot qualify for medical coverage, you can still secure term life insurance without having to get your health checked.
Buy as much coverage as you can afford – There is no reason not buy the most coverage you can afford because even after the premium has been paid out, there is cash value in the policy that keeps growing if invested properly. Get your family will protected and buy policies that are equal to ten times your current annual income or more.
Do not let your policy lapse – Once you buy a term life insurance policy, you should keep it in force as long as possible. The longer the policy is in force, the more cash value and death benefits you will earn. If you have to cancel a term life insurance policy, some companies will allow you to convert your coverage into permanent coverage with no medical exam if you can afford a higher premium.
If you are looking for information about whole-life insurance rates, here is a brief overview of the different factors that impact the cost of this type of insurance:
Type of plan - Whole-life policies are either guaranteed or non-guaranteed. Guaranteed policies are guaranteed-issue policies where the insurance company assumes the risk of paying for death benefits. Non-guaranteed policies are non-guaranteed or variable rate plans.
Guaranteed issue - Guaranteed policy offers the lowest cost as they do not have to rely on a medical exam and they have no lapse fees which are generally higher than non-guaranteed term life insurance. This is why it is not wise to buy a non-guaranteed or variable rate plan even though it might be cheaper at first because that plan will eventually cost more in the long run than a guaranteed issue life insurance policy.
Non-cancelable - You can keep non-cancelable life insurance in force as long as you pay the premium, so it's not a good idea to cancel this kind of policy when you no longer need it. The only exception would be if your health has deteriorated in such a way that makes you uninsurable.
When comparing whole-life rates, consider that there is no guarantee that the company will have enough cash flow to pay out death benefits 100% of the time. If they have any sort of financial difficulty, they might not be able to make payout on their policies.
Conclusion
There are many reasons to buy term life insurance, including the low rates and no medical exam. Term life insurance is also a great option for people who have a high risk of death but do not want to spend thousands of dollars on whole-life coverage.
When deciding on the right type of life insurance for your family, please consider that some companies offer discounts on their rates or increased coverage at reduced premiums if you ask them about these options. Please verify with your agent that you are not getting "cheap" life insurance from this company just because they do not want to lose your business.