If you have no ideaÂ how much life insurance you need, youâ€™re not alone. Â Most people have no clue how much life insurance or what type of life insurance they need. Term life insurance is designed to protect your family and loved ones in the event of your untimely passing. To get the right life insurance policy to protect your family, it is important to understand how term life insurance works and how your other financial resources can work together with life insurance to create a safety net and protect the ones you love most.
How Term Life Insurance Works
Life insurance comes in two primary types: term life insurance and permanent life insurance, such as Whole Life or Universal Life. Permanent life insurance is comparatively much more expensive, so today we will focus on term life insurance.
Term life insurance is life insurance that covers the insured individual for a specific period of time. If the insured dies at any time during the term, the entire policy value is paid out to the named beneficiaries. At the end of the initial term period (typically 10, 15, 20, 25, 30 year term period), the term life insurance policy premiums increase annually thereafter.
Because the chances of death are much less over the short term and at younger ages, life insurance companies are able to offer much lower rates for term life insurance than for permanent types of life insurance coverage.
The rates you pay will be largely determined by your age and present health. However, should your health change, you could find yourself paying a higher rate or find that coverage is unavailable other than for a simplified issue, guaranteed issue or accidental death policy. But because a change in your health wonâ€™t affect policy premiums on a current life insurance policy, itâ€™s, therefore, best to purchase a policy when youâ€™re still healthy.
Cover Yourself for the Short-Term
Term life insurance is designed to be used over a limited period of time, usually 10 to 30 years.
In the short-term, your familyâ€™s financial needs may only be covered by savings and investments. Some employers may offer group life insurance to their employees at a discount as a benefit, but although this type of coverage is typically automatic, itâ€™s often limited in face value and is valid only as long as youâ€™re employed â€“ meaning an outside term life policy is still recommended.
Life Insurance Covers the Medium-Term
If your life insurance needs are between 10 to 30 years, term life insurance is an ideal vehicle to help cover your family. Most people do not have a large enough nest egg of savings and investments to cover the needs of their family for the long-term, which is why term life insurance exists and why it can be such a powerful financial tool. Often times, getting approved can take as little as a few weeks to a month, and temporary coverage is usually offered during the underwriting of your insurance policy.
It is best to choose a term length and face amount that will cover your familyâ€™s needs until they will be financially able to rely on other savings and income, such as retirement accounts or other investments.
For example, you might choose a 30-year term life insurance policy because that may cover your family until you are near retirement age, especially if you are younger, have a mortgage or want to provide for your childrenâ€™s college education. Your financial needs may change with time, so you may only need a shorter term policy the closer you are to retirement or when your financial obligations have decreased. If you expect that to happen in ten years, consider a ten-year term. If you expect it to take 20 or 30 years, choosing a long-term life insurance plan may make sense.
Savings Covers the Long-Term
Life insurance should be a part of any personal finance plan. In the short-term, an emergency fundÂ can cover immediate needs. In the medium term, you should be saving and investing for retirement. Once you reach retirement, you should have enough savings and investments in place that term life insurance is potentially no longer needed.Â
Apply for Term Life Insurance Today!
Applying for term life insurance is easy. You can get competitive quotes from multiple insurance carriers after filling out an easy, no obligation quote request. Youâ€™ll have your family protected in no time so you can rest easy at work, at home or wherever the adventures of life take you.
Your familyâ€™s financial security is too important to leave to chance.
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