You may be aware of the benefits that life insurance provides: financial security for your family in the event of your unfortunate passing. But do you know all the options available to you? Do you know the difference between term and whole life insurance or when to choose which?
Today, we’ll explore what term life insurance is so you can have the information available to make an educated choice about an important policy that may one day change the lives of your loved ones.
We’ll also cover the benefits term life insurance provides, how it differs from other forms of life insurance, and tips for when to choose this unique form of financial protection.
What is Term Life Insurance?
As you’re likely aware, paying for life insurance entails paying a certain amount every month for a lump-sum payout in the unfortunate event of someone passing away (you, if you’re the policyholder).
Term life insurance is an affordable type of life insurance where you would pay a premium for a specified amount of time, known as a “term.” The term can range anywhere from 5 to 30 years and is chosen by you depending on your needs. It’s important to remember that the coverage provided is only valid if you (or the insured) pass away within this period.
This sets term life insurance apart from other types of life insurance. For example, whole life insurance provides lifetime coverage, as well as universal life insurance. This means it’s a perfect choice for someone looking to protect their families financially during a critical phase, which could be taking out a mortgage or taking on a large loan.
One of the primary reasons why term life insurance is so popular is because it’s arguably the cheapest type of life insurance available. The premiums that you’d pay for term life insurance are significantly less than that of whole or universal life insurance, but with that being said, there are benefits you won’t receive.
With term life insurance, you can avoid overstretching your budget but still secure financial relief and independence for your family after your unfortunate passing. It’s a very cost-effective solution to offset any financial concerns and stress related to the passing of a family member whose finances are relied on.
Furthermore, most term life insurance policies are instant, meaning that your beneficiaries can gain access to the death benefit just after a few months of paying your premiums.
Short-Term Needs Coverage
Another reason you may want to consider signing up for instant-term life insurance is because of the short-term coverage it provides. Other life insurance types, like whole life insurance, have a higher premium because a percentage of that is saved as a separate fund that can be borrowed against or withdrawn from.
However, you can sign up for term life insurance if you’ve made important life decisions, like taking out a mortgage, for example. In the event of your unfortunate passing, the death benefit can be used by your family to make payments on the mortgage and to cover funeral costs.
Term life insurance is also commonly used to safeguard the future education of a person’s children. If you were to pass away untimely, your children would have funds available to pay for their tuition.
Another benefit of term life insurance is you select the term you’d like coverage for, which allows you to choose a policy that matches your goals for the future. For example, if you’ve just had children, you can take out a term life insurance policy of 25 years, which means that if you pass away during that term, your children will have the financial freedom to go to schools of their choice and be taken care of until they can care for themselves.
Another example might be if you’ve taken on a massive loan that may take you 10 years to pay back. You can select a policy for 10 years to safeguard your family from having to take on the financial burden of repaying that loan themselves.
In other words, the customized coverage that term life insurance offers makes it an adaptable choice that can suit most financial circumstances.