Life insurance is something every human being needs. From infants to adults, this is an insurance product that you do not want to lack. When the time comes to need term life insurance, it will be too late to go back and obtain it.
If permanent life insurance is not within your budget such as whole or universal life policies, then term life insurance is another affordable solution. Speaking with your local independent insurance agent to go over coverages and pricing options is a great first step.
What Is Term Life Insurance?
There are two options when it comes to life insurance products which are permanent life insurance or a term life insurance policy:
- Permanent life insurance: This insurance lasts for as long as you live with some policies having an expiration date of over 100 years. As long as your premiums are paid, your policy will stay in effect. One of the most popular forms is whole life. It offers a fixed premium from start to finish. And it works like a savings account, accruing money that you can borrow against with a loan.
- Term life insurance: Here, you get life insurance for a set period of time with terms of typically ten, twenty, or thirty years. Your premiums are fixed for the entire length of your term. And it tends to be considerably less than permanent life insurance.
With both varieties of life insurance, your chosen beneficiary receives the full death benefit when you become deceased. The death benefit can pay for any debt left behind, funeral costs, or anything else the beneficiary chooses.
Term Life vs. Permanent Life Insurance
|Term Life Insurance||Permanent Life Insurance|
|Coverage for a specific term (Usually between 5 to 25 years)..||Designed to provide coverage for individual's entire life.|
|Typically provides no cash value||Will build cash value that accumulates over the life of the policy.|
|Often provides protection for specific times of need, such as a mortgage or a child's college tuition.||Cash value can be accessed if needed for any reason and can provide guaranteed income after retirement.|
What Does Term Life Insurance Cover?
Life insurance is different from some other insurance policy products in that it doesn’t cover specific situations. A policyholder will select the amount of life insurance they desire for when they pass. From there the beneficiary receives the full payout in the manner in which they choose.
Once the beneficiary receives the funds, it is their responsibility to do what they deem with the finances. Your beneficiary should be a person you trust, knowing they will use the finances to pay for things like funeral expenses, medical bills, or setting up a trust for any young children.
Why You Should Buy Term Life Insurance
Having life insurance is the first step — the type of life policy you select is dependent on your budget and coverages needed. If your situation demands a larger benefit but your budget is firm, then term life insurance may be the right option for you.
It is best to meet with your independent insurance agent and discuss the unpaid debts and expenses that you may have and for how long you will have them. This, along with your budget and coverage amount, will determine which life insurance policy will be most beneficial for your situation.
How Much Does Term Life Insurance Cost?
The cost of term life insurance is different for each person because it is individualized. Age and health are two of the strongest factors that go into the cost of your premiums. Insurance companies rely on their actuaries to determine how risky of an individual you are to insure by estimating how long you may live using statistical data.
When you apply for a policy, they look to see where you fit based on the physical shape you’re in and the terms you desire. Your premiums won't increase and are locked in. With a term life policy, rates are usually much lower than a standard permanent policy.
What Happens When Term Life Insurance Ends?
Within the last two years of your term life policy, you will receive correspondence from the insurance company on your options. The insurance company will let you know that your policy expiration is approaching and the three choices you have.
- Renewal: Add a new term to your policy that will give you the same benefit amount. This option will take into account your new age, and your rates will be much higher.
- Convert to a permanent policy: This option allows you to transition your term life policy into a permanent policy with the same benefit that will last as long as you are alive. Again, premiums would be much higher and the cost may or may not make sense. It is best to discuss this with your independent insurance agent.
- Terminate: A term life insurance policy is meant to only last a certain period of time assuming that you will no longer need the death benefit due to having saved your funds in preparation once it expires. In this case, you can terminate your policy and purchase a new type of insurance or a new benefit limit that fits your needs.
If you outlive your term life policy, there are a number of alternatives that you have. A term life policy is a great option still and should be seriously considered when talking with your independent insurance agent.
What Happens if Both Spouses Pass away Together?
In the event that both you and your spouse pass at the same time then there are some more details to be figured out. Nothing would necessarily change with your life insurance policy. However, if you are both listed as the beneficiary for one another, then having an estate plan is vital.
Speaking with an estate attorney and having them walk you through every step of the process to make sure that when you pass, any children are financially supported. If you’d like more information about estate planning, the link is right here or speak with a licensed estate planner.
How to Purchase Term Life Insurance
The best resource when it comes to term life insurance is your independent insurance agent. They will have a variety of policy options that will suit your specific needs. Find an independent insurance agent who can advise you in your term life insurance planning today.