Life Insurance, the facts
Life insurance seems like the last thing you want to think about. You’re living your life, making plans and enjoying the here and now, but one day you will grow old and dependency is bound to take over. No matter how old you are or what shape your health might be in, it’s never too early to think about life insurance – after all, no one wants their loved ones to suffer financially because of their passing.
This introduction might not inspire the thought “I need that!” but it will hopefully make people consider that everyone needs some form of financial support as they age so people can live more comfortably without having to worry about money all the time. Life insurance can help pay for many important things, such as housing, education and medical costs.
When looking into a life insurance policy, there are two types to consider: term life insurance and whole life insurance. Both have their benefits but it’s important to know what you’re getting into so you can make the best decision for your specific situation.
What exactly is term life insurance?
Term life insurance is simply a certain amount of coverage for a specified period of time (the “term”). This type of insuance is more commonly purchased – especially by younger adults – because it’s much cheaper than whole life.
Term life insurance is usually best for people who are not married or who have no dependents. This type of policy is also popular to cover people for a few years after their mortgage has been paid off.
Why should you consider buying term life insurance?
Because it’s affordable, it’s a good idea to invest in some form of coverage that can be used when the unexpected happens. You can choose the amount to cover your mortgage, college fund and any other important expenses not yet covered like funeral costs.
Despite being relatively inexpensive, term life insurance is a serious decision that should not be taken lightly. Think about the type of coverage you want and try to estimate how much you might need. You might need to buy more than one policy in order to cover your family as well as yourself; thus, comparing the different options can help you decide which is right for you.
What are the terms of a term life insurance policy?
As previously stated, term insurance comes in various forms but typically covers for eight or ten years. You can also purchase life insurance for a shorter term if you don’t need it for a specific amount of time.
Also, most term policies will have an option to renew for the same period at the same price as your initial premium. The big advantage to this is that you can break even on your total cost when you would need to renew it. These kinds of policies make it easier to budget over time and know how much you will end up paying. However, some people may not like knowing that their coverage won’t last indefinitely and that they have to re-pay in order to maintain it.
Are there different kinds of term life insurance policies?
Yes. Consider a few different types of term life insurance policies and their pros and cons to better understand all your options:
Universal or Straight Term Life Insurance – This kind of policy provides coverage for all illnesses, accidents and injuries. This level of coverage usually is the most expensive kind of term life insurance policy. If you are looking for the most comprehensive kind of coverage, this may be the best option because it covers any unexpected event in which you become terminally ill or disabled. Universal policies usually don’t come with any cash values or dividends. However, if money is not a concern to you, this may be the best option.
– This kind of policy provides coverage for all illnesses, accidents and injuries. This level of coverage usually is the most expensive kind of term life insurance policy. If you are looking for the most comprehensive kind of coverage, this may be the best option because it covers any unexpected event in which you become terminally ill or disabled. Universal policies usually don’t come with any cash values or dividends. However, if money is not a concern to you, this may be the best option. Single-Period Life Insurance – With this type of policy, you can choose to order coverage for a specific period of time (usually at least two years) or for the median of your expected life expectancy (at least 10 years). This is a good choice for people who are not sure if they will die sooner than average. It gives you the option to purchase additional coverage as needed.
– With this type of policy, you can choose to order coverage for a specific period of time (usually at least two years) or for the median of your expected life expectancy (at least 10 years). This is a good choice for people who are not sure if they will die sooner than average. It gives you the option to purchase additional coverage as needed. Guaranteed Issue Life Insurance – If you have a poor health history or are over 70 years old, guaranteed issue life insurance may be the only affordable option for you. This kind of term life insurance policy is offered to people who might otherwise not be able to get coverage because they wouldn’t pass the medical exam. Premiums will be much higher with a guaranteed issue life insurance policy but at least there is an option for people who need it.
– If you have a poor health history or are over 70 years old, guaranteed issue life insurance may be the only affordable option for you. This kind of term life insurance policy is offered to people who might otherwise not be able to get coverage because they wouldn’t pass the medical exam. Premiums will be much higher with a guaranteed issue life insurance policy but at least there is an option for people who need it. Limited Payment Term Life Insurance – Sometimes called “Balloon” policies, limited payment life insurance policies offer coverage for a set amount of time (usually 5 years) or until a certain age (usually 60 years old). Once the coverage ends, you have the option to renew the insurance again. These types of policies only provide partial death cover and usually no cash values for dividends.
Conclusion
Term life insurance can be an affordable way to protect your family from unforeseen tragedies. The type of policy you choose depends on your specific needs and budget. In the end, a little foresight and planning can help you make an informed decision.
*Although all quotes are accurate at the time of publication, they are subject to change as insurance companies may increase or decrease their premiums based on such factors as their policyholders’ occupation and age. Any changes in the premium rates will be reflected in any updated quotes that may be provided. To receive a quote for term life insurance in the United States, please fill out our quote request form today.