Understanding Term Life Insurance: Less Expensive, More Specific. No More, No Less
Talking about life insurance isn’t as enjoyable as talking about say, last night’s game or your daughter’s first ballet recital. But it’s a necessary conversation.
And the topic can be overwhelming. You probably already know that life insurance protects your family if you pass away, and you pay for it with monthly premium payments while you’re still alive.
What you may not know is that term life insurance is a less expensive option.
How is Term Insurance Different from Other Types of Life Insurance?
Other insurance types provide lifetime coverage but are at least three times more expensive. Term life insurance companies charge a specific premium and pay a specific death benefit within a specific period of time. No more, no less.
Lifetime coverage can offer investment opportunities, but that’s why you’ll pay a significantly higher premium. Because term insurance is sold in limited time increments, the insurance company assumes less risk, so you pay less in premiums and your family receives a fixed benefit if you pass away.
Not everyone is at a place in their lives where they can afford to pay for lifetime coverage. Term life gives you control over how long you want to pay for coverage and how much you want to spend on monthly premiums.
Are There Different Types of Term Life Insurance?
There are two types: level term and renewable term.
With a level term plan, premiums and benefits remain constant for the entire coverage period. And you must buy at least five years’ worth of coverage. It may or may not require a medical exam to renew it once the term is up. This plan is perfect for young families or young, single professionals who expect to increase their income as they grow older.
Renewable term life insurance is bought on an annual basis. It’s cheaper than level term in the short run but will increase every year as you age. However, you don’t have to submit to any health questions or medical exam to renew your policy, which makes it ideal for people predisposed to developing a health condition as they grow older.
There are several clauses you can add to further personalize your plan for level or renewable term policies, but that’s another discussion.
How Do I Choose the Right Term Policy?
You must ask some difficult questions. How do you envision your family’s life without you? If you were no longer around, would your son still be able to play league soccer? Would your family be able to pay for your daughter’s dream wedding with you not there to walk her down the aisle?
Will they both be able to go to college?
Some variables to consider include:
- The number of beneficiaries you choose
- The standard of living you’d like them to enjoy
- Your current health
- Your current debt and cash flow
Because life insurance is such a hefty topic, many people find that a quick chat with an insurance professional clarifies the options and lightens the decision-making process. No more, no less.
Or, if you’re ready to start shopping, get a quote for life insurance online now.