Buying A Term Life Insurance Policy
You may want to buy term life insurance whether your need is short term or long term.
You should appreciate though that term insurance is temporary insurance. What do I mean by that?
Term Life insurance can be kept for specific periods of time. You may buy a term policy for 10 years, 15 years or 20 years for example.
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Looking To Buy Term Life Insurance?
- Why Do You Need Term Insurance?
If you need to protect your family for a given period of time then term insurance may be what you are looking for. Your youngest is age 6, for example, and you want to be certain s/he graduates college even if you are not here. A 20 year term policy would likely do the trick.
If you have your last child in college you probably would be fine with a 5 year term policy.
Term insurance frees up cash you normally would need to save to guarantee your family’s future. If you have huge demands on your income you don’t need to be spending a lot on life insurance. As term policies cost less than permanent policies you would be wise to buy term life insurance. In many a case you have the option to convert to a permanent plan within a specific period of time.
Another reason you would buy term, other than the fact that it replaces your income in the event of your death, is to replace the financial value of a stay at home spouse. It is very difficult to put a value on such a persons contribution but you will agree that this person has tremendous value.
Banks may also require life coverage before they give you a loan. As this is a temporary need a term policy would fit the bill.
- How Does Term Life Insurance Work?
You contract with an insurance company to pay a set premium and upon your death the company will pay the face amount of the policy to your beneficiaries either in one lump sum or in the form of an income. The death benefit is usually tax free unless you make the proceeds part of your estate through a will.
Your premiums can be paid monthly, quarterly, semi-annually or annually.
- What Types Of Term Life Policies Are Available?
There are basically two types of term policies. The first is the yearly renewable term policy and the other type is level term life insurance.
Yearly renewable term can be looked at as a one year term which you have the option of renewing each year at a higher premium. The death benefit remains level throughout. This type of policy starts out to be very inexpensive but the premiums can eventually become quite prohibitive.
The other plans also have level face amounts but the premiums remain level throughout the life of the policy. The premiums are higher than the yearly renewable term from the beginning but they never increase.
You can buy term life insurance for 5 years, 10 years, 15 years, 20 years, 25 years or 30 years. The longer the period you contract for the more it costs. A 30 year term policy will cost more than a 15 or 20 year term. A 5 year policy will have a lower premium than a 10 year level policy.