Life insurance is a very vital part of planning in your family especially if your family depends on your income. It kind of hurts to think about one’s death, nobody wants to plan for their death because we all scared of death, but a little discomfort and adjustment now can save your family a lot of financial troubles if the worst should happen.
Why you need to buy term life insurance
Generally, the sole aim of purchasing life insurance plans is to replace your income if you die. This enables your loved ones to pay off certain debts and living costs.
For instance, if you own a house with your spouse and you happen to die. Your spouse would have to pay the mortgage on his or her own and also offset certain debts, this can be very stressful and discomforting. If happen you to get the right term life insurance policy before your death, your spouse will get enough money from the policy’s death benefit to offset bills or at least keep up with the mortgage.
Term life insurance is a very popular type of life insurance compared to other types of life insurance because of its low cost.
How term life insurance works
The processes involved in purchasing a term life insurance plan is quite simple and the benefits vary depending on the insurance company involved. Generally, an insurance company offers to pay a particular amount to your beneficiaries if you die during the policy’s term. You will have to pay a monthly premium to the company for the duration of that term to enjoy this benefit.
These are certain key points in you need to keep in mind about term life insurance:
Life insurance calculations are based on life expectance. The cost of life insurance grows higher as you get older.
Your life insurance ends once you outlive the policy terms. You will have to buy another policy if you desire to carry life insurance. Recall that the older you get, the more expensive the policy becomes, so you should know that the annual premium for another policy could be quite expensive compared to the previous because you are getting g older.
Do not hesitate to buy an additional term life policy at an extra cost if you discover that your term life policy is not sufficient.
Cover Range of Term life insurance
It is quite true that the benefit amount you choose at the start of your policy doesn’t have a specified use, so you should be very careful when choosing your beneficiaries to avoid misuse of funds. Generally, these funds are used to cover funeral expenses, debts, mortgage, or replace the lost income of the insured party.
It should be known also that there is no legal term requiring them to spend the benefits the way you intended before your death. Although, you can choose more than one beneficiaries, which gives you the ability to split the money among family members the way you intend. For more binding effect, the usage of funds should be stated in a will to help protect matters involving mortgage payment or college tuition for children.
Types of term life insurance
Below are some types of term life insurance:
Annual renewable term policy: this policy rates go up every year and the rate of your renewal is calculated based on the probability of your dying within the next year. This is a yearly life insurance plan with a renewal option for each year for a specified duration, such as 20 years.
Level premium: in this policy’s term, your monthly premium remains the same for 20 years. Most life term policies give you the option to renew your coverage at the end of the term without reviewing your medical status, nevertheless, your monthly premiums may rise substantially after the level term period of 20 years.
Return of premium: this policy pays you back your premiums if you outlive your term life policy. You can expect to pay at least 50% more on premiums for these policies, so make sure you enquire properly.
Simplified issue or Guaranteed issue term: this policy is normally used by people with an illness or medical history, the policies require only a few questions and no medical exams. Although, you get to pay a higher premium to get the guaranteed coverage. In this policy, the insurance company bears more risk by insuring people without a proper investigation into their medical conditions. Guaranteed issue policies often have “graded” benefits that pay only a partial benefit if you die within the first several years of the policy.
Final Expense: if you detest answering too many questions and just want low a key insurance plan to take care of your funeral expenses once you are dead, you might want to consider the final expose insurance. The benefits are lower compared to other conventional term life insurance and you get more for the convenience because you can’t be turned down by this type of policy.
How to shop for term life insurance
Discover how much life insurance coverage you get by using the life insurance calculator. Your life insurance benefits should be able to take of funeral costs, mortgage, income, debt, and education or at least keep up with most. The life insurance calculator considers all the factors to give you a clear estimate of the ideal amount of life insurance coverage.
- Choose a life insurance company that will meet with your intended goals and is quite easy to access.
- Choose a suiting length of a life insurance policy. Common terms include 5, 10, 15, 20, and 30 years.
- Consider the number of benefits for each life insurance policy, although the benefits solely depend on several factors, including your income, debts, and the number of people who depend on you financially.
Medical examination: The exam generally covers your height, weight, blood pressure, medical history, and blood and urine testing.
Initiation of policy: Once your policy has been bought, to keep it running is a matter of paying your monthly premiums. If you die while the policy is still active, your beneficiaries receive the face amount of the policy tax-free.
It is always good to seek the services of an insurance advisor when you plan on purchasing a life insurance policy. An insurance advisor will guide on the best insurance plan to go for. Let us know your thoughts on the issue of term life insurance in the comment box below.