Term Life Insurance
Term life insurance offers basic protection for your chosen beneficiaries at affordable rates. This flexible form of coverage allows you to choose the length of time to extend your policy, usually up to 30 years. If you're looking for a short-term solution to your insurance needs that won't tax your budget, comparing rates from a term life insurance company may be the ideal option for you and your family.
Many people have loved ones they want to cover for a limited period; however, they don't foresee the need to secure their survivors beyond that point. For example, you may have children you want to protect until they graduate from college, or an elderly parent who will depend on your income for the rest of his or her life. Term plans enable you to provide that security for your beneficiaries without any obligation to continue paying premiums after your policy's expiration date.
Life Insurance Pros and Cons
Although some insurers portray term life insurance as bare-bones coverage, a streamlined policy may be all you require at this stage. Healthy young adults in their 20s who are just starting their families and hoping to purchase a home may have very little to spend on life insurance after they've met all of their other financial responsibilities. Term life insurance can put substantial death benefits for your spouse, children or other survivors within your reach.
Term life insurance may not work to your advantage if you decide you want to continue coverage after your termination date, or if you decide you need protection as an older adult. Because senior citizens generally pay higher life insurance rates, you may find that you can no longer afford the premiums for term policies after you're retired. Some insurers may require you to pass a medical examination to re-evaluate your insurability.
If you've developed a serious health condition, providers may no longer consider you insurable. At that point, you may not be able to secure death benefits for your family or cover your funeral and burial expenses. When you're interviewing agents and investigating different policies, make sure you clarify the insurer's requirements for renewal after your plan ends.
Unlike permanent plans, which may guarantee death benefits for your entire life, term policies build no cash value and only pay off if you die before the conclusion of your contract. For some people, paying for a product that offers no return unless they die seems like a gamble. However, the security of protecting the people who are closest to you has an immeasurable value when you consider how your death will affect your loved ones financially.
Flexible Payment Options
When you're comparing the rates that different insurance providers offer, ask your agent if these insurers give you the option to extend your coverage after your term date. Some companies will allow you to renew your policy without providing proof of insurability. Others may permit renewal at a higher, but still affordable, rate.
If you feel that you're ready for a long-term solution when your contract expires, your insurer may allow you to convert your term life insurance to a permanent arrangement. With never ending insurance, you'll have protection for the rest of your life, with the option of participating in an investment plan through your insurer that builds cash value over time. This investment component may provide you with dividends that you can borrow against if you suffer a financial emergency, decide to start a business or intend to pay for your children's education.
Short-term policies that last for five or 10 years generally have fixed premiums throughout the term of the plan. Insurers may allow you to choose your payment schedule, selecting annual, quarterly, bi-monthly or monthly due dates according to your needs. With longer term life insurance contracts, you may be able to lock in a fixed rate for the first years of your agreement. Premiums may then increase each year as you age.
To make the most of term life insurance, you should have specific goals in mind when you begin collecting quotes from agents and comparing rates. You should also have solid resources for safeguarding your future. If you already have a stable investment fund, a time-line for retirement, an emergency savings and a carefully written will, basic security may be all you need to round out your financial strategy and fulfill your family responsibilities.
Term life insurance allows you to spend, save or invest your hard-earned income as you choose, with minimal obligations to an insurer. If you'd rather take charge of your investments and your finances, you may elect to purchase the term option that gives you the maximum death benefits for each dollar you spend. Talk with a reliable agent to compare the advantages of the alternatives you have available.
