Term Life Insurance: Important Facts to Know

While death is unavoidable, the age when you will pass away cannot be accurately predicted. Your death could result in financial hardship for loved ones who are dependent on you for financial support as well as for those who are dependent on you for their care and more. Because of the uncertainty of when death will occur, it is important to take action to safeguard your loved ones from a financial standpoint. Purchasing life insurance is one of the more common steps that individuals will take to prepare for the end of life and to protect their loved ones’ financial well-being after they have passed on. Term life insurance is a popular type of coverage to consider, and there are a few important facts to remember about this type of coverage as you shop around and set up a new policy that is right for you.

What Is Term Life Insurance?
Term life insurance and whole life insurance are the two most popular insurance options available. Whole life is coverage that will never expire, and it will remain in place as long as the premium continues to be paid on it. Term life, on the other hand, will expire at a specific date. The death benefits will remain in force throughout the term, but they will cease when the term expires. While term life will expire, it is a popular option because it is significant more affordable than whole life insurance.

The Typical Term Length
There are multiple term lengths that are commonly associated with term life insurance. The most common options are 10, 20 and 30 year terms, but there are some variations outside of this. Generally, the longer the term length, the more expensive the insurance premium. However, because life insurance premium rates can increase as you get older, many may benefit by purchasing a longer term policy earlier in life rather than planning to purchase consecutive 10 or 20 year policies.

The Amount of Coverage Needed
When you purchase a term life insurance policy, you will need to decide the term length as well as the coverage amount. The coverage amount generally can be as high or as low as you desire, but there are some limitations for this. The life insurance underwriter as well as your representative can provide you with their guidelines. Generally, the coverage can be used to pay funeral and burial costs as well as final medical expenses. Outstanding debts, such as credit cards, a car loan or a home mortgage can also be paid off with the death benefits. This can reduce the cost of living that loved ones will have after your passing. Death benefits can also supplement lost income and pay for major life events, such as a child’s college education or wedding. An agent may help you to determine the amount of coverage that you need.

The Ability to Purchase Multiple Policies
It is important to note that different policies can be purchased for different reasons. For example, death benefits for funeral costs will be needed regardless of the stage of life you are in when you pass away. A home mortgage may be paid off in 20 or 30 years, so a life insurance policy can be purchased to pay for this expense. In addition, if you have older kids, they may be out of the house and no longer financially dependent on you in 10 years, so you may purchase another policy that would be related to their financial care and well-being and that has a shorter term. Making a list of coverage needs and time periods when the coverage is needed can be beneficial.

Term life insurance can also be purchased in combination with whole life insurance. This can enable you to take advantage of the benefits of both while purchasing life insurance coverage that most closely meets all of your needs in an affordable way.

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