What is Term Life Insurance?
What is Term Life Insurance, How it Works, and Who Needs It?
Term life insurance is an affordable form of life insurance that provides financial protection for a set period of time. It provides a “death benefit that pays the heirs of the policyholder throughout” this period. Typical ranges for these periods (called terms) are between 10–30 years at increments of 5 (i.e., 10, 15, 20, 25, and 30 years).
Term life insurance can be a lifeline for families who experience a tragedy by providing financial security. Understanding how term life insurance works and who needs it is essential in making informed risk management decisions.
Benefits of Term Life Insurance
As we mentioned above, term life insurance can provide significant death benefits for your family such as:
- Replacing your income,
- Covering your final expenses and end-of-life care,
- Paying off your debt, and
- Funding college education for your children
Differences Between Term Life and Permanent Life Insurance
Some difference between term life insurance and permanent life insurance policies such as whole life and universal life include:
- Term life generally costs less in premium payments than similar permanent life insurance policies.
- As the names suggests, “term” policies cover the insured for a limited period of years, whereas “permanent” polices cover typical lifetimes.
- Permanent polices have cash value (i.e., accumulated value funded by premium payments) whereas term polices do not.
Who Should Buy Term Life Insurance?
Whether you should buy term life insurance or not largely depends on several factors such as your age, income, and the size of your family. Typically, those with dependents or considerable shared debt should consider term life insurance coverage. Similarly, young adults might benefit from term life polices as well as older people who want to leave behind and inheritance.
How Much Coverage Do You Need with Term Life Insurance?
The amount of coverage you need depends on details such as your age, income, shared debt, lifestyle, and family size. Generally, you need more coverage the younger you are, the larger you family is, and the greater your shared debt in order to ensure your loved ones are secured financially. Forbes has a simple life insurance calculator that can be used for a general estimate.
Conclusion
Unexpected events like death can cause a financial burden on your family. Without adequate protection, they may struggle to cover their living expenses.
Term life insurance provides a simple and affordable solution for protecting your loved ones from the financial burden of your passing. Get the peace of mind you need with a term life insurance today and ensure that your family is taken care of no matter what comes their way!
If you are in need of life insurance, talk to your local, independent insurance agent.
If you reside in NM, feel free to
- Call us at (505) 355–6335,
- Email us at client.services@cooperanderson.agency, or
- Visit our website.
We are risk management specialists here to help you protect your future. We facilitate comprehensive insurance solutions to ensure peace of mind and financial security.
