At some point, most adults have to choose whether or not to purchase life insurance. There are so many options available, choosing the right plan can be overwhelming. Term life insurance is one of these options.
What is term life insurance?
Term life insurance is a simple straight-forward affordable option. Policies are issued by term. This varies by company, but, most have 10, 15, 20 or 30 year options. Policies have stated (set) benefit amounts that are paid to a beneficiary upon death; if the death occurs during the term period. Premiums are the same for the entire term of the policy. Like most other insurance plans, physical examinations are required for term life insurance plans. At the end of the term policy owners are given the option to renew the policy or convert it to a different type of policy. Renewing a policy does not require an additional physical examination.
What to consider before choosing term life insurance.
There are several things to consider before choosing to purchase a term life insurance policy. One of the most prominent issues is cost. Term life policies usually have much lower premiums than whole or variable life policies. However, premiums increase when the policy is renewed at the end of a term. Unlike the other types of insurance term life does not have any cash value, and you cannot take out a loan against it. Policies are only issued for a set number of years; they are not meant to span an entire lifetime. Term life insurance polices do not have any tax benefits and do not accumulate any wealth. Like any type of policy, term life has benefits, as well as, disadvantages.
Who should purchase term life insurance?
Consumers choose term life insurance for many reasons. Issues from financial situations to personal health influence the decision to purchase a policy. The following is a short list of consumer types who should purchase term life insurance:
- Those on a budget who must have life insurance.
- People who have young families.
- Consumers who have substantial debts; mortgage, college tuition, etc.
- People only seeking a death benefit.
- Those who already have a retirement plan.
- Older consumers who are facing possible changes in their physical health.
This is by no means an all-inclusive list.
Life is constantly changing, so are insurance coverage needs. Customers should periodically reevaluate insurance policies and adjust them as necessary. Choosing term life insurance maybe the best option for many people.
“Consumers: Life Insurance and Annuities” — California Department of Insurance