The Quick Answer
Here is a quick list of the advantages of term life insurance:
- You can select certain lengths of time you want to be covered so you can essentially guarantee certain life events such as children graduating school
- On the event you pass away your beneficiaries receive a death benefit
- It is very inexpensive and can be cheaper depending on the length of your term and the younger and healthier you are
- Can be extended if your term is coming to an end and you would like to continue your coverage
What is term life insurance?
Term life insurance is a form of life insurance that covers you for a certain amount of time. Most term life insurance policies can cover you for 10,15, 20 or even 30 years. During this time if you were to pass away, your term life insurance would payout to your beneficiaries.
This is called a policy’s death benefit and is one of the advantages of term life insurance. The death benefit will be paid out to your beneficiary or beneficiaries and many times, is not taxed. Normally people buy term life insurance to cover the cost of their children’s schooling or the cost of their mortgage for a house. Doing this covers the beneficiaries in the event of your passing, allowing them to avoid financial hardship and softening the blow of your loss.
What happens when you reach the end of your term?
When the end of your policy has been reached, your life insurance coverage ends. In other words if your policy ends and you have not passed away, your beneficiaries will not receive the death benefit of your policy.
You have the opportunity to extend your term incrementally however at a heftier price. You can extend it one year at a time. You may also consider ending that coverage and then getting another term insurance. Your premium will still be more expensive than the first time you purchased life insurance because you will be older and possibly have more health issues. But this could save you money over extending your previous term incrementally.
The good news of your beneficiaries not receiving the death benefit means you were alive the entire time to enjoy your time with them and provide for them. The idea of Life insurance is to cover your beneficiaries if you pass away and can no longer cover them.
Do you need term life insurance?
Life insurance is right for you if anyone depends on you financially. Like your kids or a stay at home spouse. Even if you are a stay at home parent you may still want to consider life insurance. Because no one may financially depend on you but you do bring value to them around the house.
You should consider life insurance if you:
- You have children or are planning on having children soon
- You have dependants that rely on your income
- You would like to leave behind something for your family to make life a little more comfortable for them or to cover burial expenses
- To prevent any financial trouble that may be caused if you pass away such as having cosigned for something, leaving your cosigner in trouble
- To cover the cost of a mortgage that you are splitting with a spouse
There are many situations when you might want to consider getting life insurance. The biggest advantage of life insurance is the policy holders peace of mind and that your beneficiaries are covered in the event of your loss.
How much do you need?
There is no clear cut rule to use when determining how much coverage your beneficiaries will need or for how long you should be covered. Generally though, it is a good idea to get a plan that covers five to ten times your income. It is also a good idea to get term lengths that cover large financial obligations.
So for example, you may want to get term insurance long enough to cover the entirety of the expenses of your children starting, finishing school and moving out. It would be a good idea to atleast get a 20 year term. You may also consider getting insurance in a similar situation but your children are older. It is still recommended you get insured however, just get a term long enough for the remainder of their time in school.
Coverage for financial obligations like this are good examples of how to decide how long you will want to be covered.
How much does term life insurance cost?
Term life is generally affordable. It is even more affordable the younger and healthier you are. Depending on the length of your term, your age, and health it can be as little as $30 monthly.
How to buy term life insurance
Here is a quick checklist for buying life insurance.
- Decide between term life insurance and permanent life insurance
- Decide your term lengths and coverage
- Do some research on different providers to find the right one for you
- Get life insurance early and stay healthy
For more information on buying term life insurance and how it compares to permanent life insurance take a look at this link: How To Find The Best Life Insurance For Young Adults: A Quick Guide!