Life insurance isn’t about dying; it’s about protecting the living. Term life insurance can be a smart way to ensure your loved ones don’t suffer financially if you die.
What is term life insurance?
According to The National Association of Insurance Commissioners (NAIC), there are two types of life insurance: term and permanent.
Term life insurance is coverage purchased for a set period of time that pays a death benefit if you die during that time. Also known as temporary life insurance, it doesn’t build value, but its lower premiums offer the greatest amount of protection for your money. While term policies can usually be renewed, premiums for the new term may be higher.
By comparison, permanent life insurance is coverage designed to span your whole life. Sometimes called cash value insurance, it offers a death benefit and functions as an investment that builds cash value over time. Premiums are initially higher, but are fixed for the life of the policy.
You may choose term life insurance, permanent life insurance, or a combination of the two.
Who should consider term life insurance?
Young adults may find term life insurance an affordable way to avoid placing a financial burden on their loved ones if they die. If they’re planning to secure a permanent life insurance policy in the future, they can consider a term policy with a conversion option.
Families, even those who already have life insurance, may add term life insurance policies in order to provide an extra layer of financial security while they’re raising children and paying a mortgage.
Single parents receiving child support may ask that their ex-spouse purchase term life insurance for the period in which they’re responsible for child support.
Grandparents raising grandchildren may strengthen their family’s safety net with term life insurance. It’s important to note that most companies won’t offer term life insurance policies to people who will reach eighty years of age before the term’s end.
What should you think about when selecting a term life insurance policy?
If you decide term life insurance is right for you, consider more than just the price tag. Since getting new life insurance often becomes harder and more expensive as you get older, find out if your ability to renew stops at a certain age. Ask what your premiums will be when you renew. If you might be interested in a permanent life insurance policy later on, ask if the policy can be converted to a permanent life insurance policy.
Used wisely, term life insurance can be a valuable tool for protecting your family’s financial security.
“Life Insurance Buyers Guide” — The National Association of Insurance Commissioners (NAIC)
“Life Insurance: It’s More Than a Death Benefit” — Insure U
“Life Situations: Tips and Information” — Insure U