From your mailbox to your television to your child’s take home school notices, someone is telling you that you need life insurance. Most often, the insurance being touted is term life insurance, one of the simplest forms of life insurance on the market. Term life insurance pays a death benefit to the person or persons identified as beneficiaries if the insured dies while the policy is in force.In order to maintain term life insurance, the policy holder must pay an annual premium, often payable in monthly installments. The premium amount is usually based upon the age, lifestyle and health status of the insured.
Some of the most frequent questions asked regarding term life insurance are:
- Is term life insurance necessary, and if so, how much coverage do I need?
- Are there special considerations?
- Should I insure myself, my spouse or my children?
Term life insurance is the simplest form of life insurance coverage. You pay premiums to an insurance company each month based on an annual premium. If the insured dies during that year, the insurance company pays the beneficiaries a fixed amount as a death benefit. Term Life insurance coverage is not an investment vehicle. It will not pay dividends. It cannot be cashed in at the end of the term. The only purpose is to pay a cash benefit to survivors if the insured person dies during the term that the policy is in force.
Generally, the insurance company determines the premium based on the age of the insured and the face value of the insurance policy (the amount of money the insurance company will pay upon the death of the insured). Since the chances that the policy holder will die increases as they advance in age, the older the insured is, the higher the premium will be. Occasionally there are conditions that may increase the or perhaps even lower the premiums. For instance, many insurers will reduce the life insurance premium if the insured is not a smoker.
There are basically 2 types of term life insurance differentiated by the way the premium is paid. With standard term life insurance, premium payments will increase each year or at the beginning of each term renewal. Standard term life insurance is often the most affordable form of insurance for a young person, but can be prohibitively expensive as they get older. In level term life insurance, the premium is guaranteed to remain the same over the life of the term, regardless of changes in health or age. Often, level term life insurance is taken out for periods of five, ten or fifteen years, and is renewable for one, two or three terms. It is more expensive at the outset, but comparatively less expensive in toward the end of the policy term, since the premium is guaranteed not to increase.
Anyone with long term debt should consider term life insurance, particularly if their death will cause a financial hardship for those left behind. This is the only way to guarantee that their financial needs will be met. Get a free quote for term life insurance today to compare rates from several carriers.
When you’re shopping around for life insurance coverage there is one big decision that you have to make before you look for quotes- which type of life insurance is right for you? There are several options, but the most common types of life insurance available are term life insurance and whole life insurance. Term life insurance is temporary life insurance because it lasts for a certain time, or term. Whole life insurance is permanent insurance that will last for your lifetime. They are very different forms of life insurance coverage. Term life insurance is more affordable, which is the reason why most people opt for this type of coverage.
What are the Advantages of Term Life Insurance?
• Very low cost compared to whole life insurance.
• Large amount of protection can be purchased at affordable rates.
• Option to choose from many different terms or periods of coverage – 1, 5, 10, 15, 20, or 30 years.
• Best choice for temporary protection needs, such as your mortgage, college tuition, or a car loan.
What are the Disadvantages of Term Life Insurance?
• Premiums increase at each renewal (the older you are, the more it costs).
• Term insurance does not build cash value.
• Coverage ends when your policy term expires.
Although term life insurance only offers coverage for a term, the benefit is that it is very affordable. You can adequately protect your family during the years when you need the most insurance. For example, if you are 35 years old, married with children, and you have a mortgage then you will probably want to have a large amount of life insurance. You should have enough to pay off your mortgage and other debts, pay for your childrens college tuition, and replace your income for the next 10, 15, or 20 years. You can get a $2,000,000 thirty year term life policy for about $1800 per year if you’re male and $1400 per year if you’re female. That’s a lot of insurance coverage for a reasonable amount of money. If you were to choose whole life you would easily pay 3 to 4 times as much for the same amount of coverage. At the end of 30 years, your obligations will be much less so you can opt for a much smaller insurance policy.
Get free life insurance quotes today to compare multiple rates from top carriers.
If you’re shopping for term life insurance, you’ve probably realized there are hundreds of sites where you can go to get quotes. This is probably the best and easiest way to shop for life insurance these days because it allows you to compare the rates from many carriers and companies.
Here are some tips on how you can save money when shopping for term life insurance:
- Compare term life insurance quotes online from several sources or find a good site that works with multiple carriers. This ensures that you get the lowest possible rates for your situation.
- Choose to pay your premiums on an annual basis if you can afford it. This is usually less expensive than if you pay you monthly or quarterly. It’s the easiest way to save 5 to 10% on your term life insurance costs.
- Be sure to look at higher levels of coverage because the difference in cost is usually very little. For example, If you need $160,000 worth of coverage, then make sure you look at quotes for $200,000 of coverage as well. For just a little bit more, you might be able to get a much bigger chunk of insurance.
- Watch out for policy fees. Find out if there are policy fees and see if you can have them waived. Sometimes carriers will eliminate all or some of the annual fees if you and your spouse are covered.
- Stop smoking. Now this isn’t an overnight fix, but it is worth considering because smokers pay an average of 2 to 3 times more for life insurance. You will have to be smoke-free for at least 12 months for most carriers, but the savings in money (and your health) are well worth it. Just to give you an example, a healthy 35 year old male who doesn’t smoke will pay around $300 per year for a $250,000 30 year level term policy. If he smokes he’ll have to pay more than double at $725 a year. It’s a big difference.
An experienced agent can steer you in the right direction towards the carrier who will have the lowest rates for your situation. He or she will take into account your age, health status, family health history, occupation, hobbies, and your driving history. Get a free quote today to compare multiple quotes for your individual needs.
Term life insurance is usually considered a short term solution (5-30 years) for one or more short term or fixed term needs like a mortgage, car loans, or college funding for your children.
Term insurance makes a lot of sense when you are young with a growing family, because the rates are low and the benefits are high.
- Term insurance is purchased for a specific number of years.
- Premiums are lower than whole life insurance, especially in the early years of the policy.
- Premiums increase with age or at renewal of your policy depending on the type of term life insurance policy you choose.
- Term insurance builds no cash value.
- Based on a study at Penn State University in 1993, less than 1% of term life policies ever pay a death benefit. People usually outlive or discontinue their policy.
- Most term life insurance policies cannot be renewed past the age of 80.
Why Do I Need Term Life Insurance?
Term life insurance offers you a way to provide cash for your family in the event you die. The money your beneficiaries receive from your life insurance policy can be used to pay for your burial costs and final expenses. It can also be used to pay off credit card debt, a mortgage or rent and other living expenses for your family. Life insurance benefits can also be used to pay for college tuition, provide money for retirement, provide cash to pay your estate taxes, or provide a stream of income that can help your family maintain their lifestyle. Also, the death benefit paid from a life insurance policy is usually income tax-free.
If you are thinking about getting some term life insurance coverage for your family, be sure to speak with an experienced agent about your situation. Get a free quote today to compare multiple rates from the nation’s top carriers.
