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Term life insurance is the the most popular type of life insurance purchased today, and that may not be a surprise. If you never take the initiative to buy a life insurance policy, your family may struggle to get by without an income during their time of bereavement. Add the fact that the average funeral with burial costs $7,848 nationwide in 2021, and it’s easy to see why so many people are worried about this troubling scenario.
Fortunately, life insurance ensures that this aspect of your life isn’t left to chance, and it’s easier than ever to buy a policy that gives you peace of mind. And while term life insurance comes in many different forms, term coverage remains popular due to its low premiums and simplicity. But what exactly is term life insurance and how does it differ from other types of life insurance?
Unlike permanent life insurance which lasts until the day you die as long as you meet your premiums, term life insurance coverage has a fixed term which is meant to last as long as you want, usually for the length of your working years. . For this reason, the majority of term life insurance policies last for 10 years, 15 years, 20 years, 25 years or 30 years.
Term life insurance does not create cash value like some other types of life insurance do, nor does it have an investment component. Instead, you pay a fixed premium for a fixed number of years, and your beneficiaries receive the death benefit if you die before the policy expires.
Although there are many reasons why consumers buy life insurance, term life insurance is usually purchased by people who want a solid level of coverage without having to pay high premiums. Since some term life insurance policies are offered online – sometimes even without a medical exam, so-called no-exam life insurance – this type of coverage is also popular with young and healthy consumers.
How much does term life insurance cost? A research with the insurer Haven Life shows that a 40-year-old woman in excellent health could currently purchase up to $400,000 in 20-year term life insurance for just over $23 a month. Meanwhile, a 40-year-old man in excellent health could get the same coverage for less than $28 a month.
- Premiums can cost a fraction of what consumers pay for permanent life insurance.
- You can get more coverage for your money.
- You can adapt the duration of the policy to your needs.
- You can buy term life insurance online, maybe even without a medical exam.
- Your policy’s death benefit ends at the end of your policy period, which means you may not be covered for your lifetime.
- Term life insurance policies do not create cash value or have an investment component.
- You will usually need to meet health and age criteria to qualify.
When choosing term life insurance, the duration of the policy will be your main concern. But there are also a few additional variables to consider when it comes to term life insurance, as there are several types of term life insurance policies:
- Level term life insurance charges the same premium for the life of the policy, and your beneficiaries will receive the same amount of death benefit if you die while the policy is in force.
- Decreasing term life insurance is term coverage that pays a decreasing death benefit over the life of your policy, even though you pay a fixed premium each month.
- Renewable term life insurance describes any renewable term life insurance policy beyond its original term, regardless of age or health condition. However, premiums will increase based on your age after the initial term.
- Refund of life insurance premiums reimburses you for the premiums you paid during the term of your policy when it ends. You will pay a higher rate for this type of coverage than for a traditional term life insurance policy.
Take the time to compare different types of term life insurance before shopping for a policy. You should also keep in mind that life insurance rates can go up or down depending on a variety of factors, many of which are beyond your control. These may include:
- Your age
- Your general state of health
- Family medical history
- Coverage amount
- Mandate’s duration
- Hobbies you may have, including risky activities
- Smoking status
Ultimately, only you can decide how much term life insurance coverage you want and how long you need. While the general rule is to buy a policy with a death benefit of at least 10 times your current income, you can invest in term life insurance with an even higher death benefit, perhaps up to 20 times your income or more. , according to your needs.
This means that someone making $50,000 a year would want to buy at least $500,000 of term life insurance, but potentially closer to $1 million or even more. Meanwhile, a high earner who brings in $100,000 a year should buy at least $1-2 million in term life insurance.
When shopping for term life insurance, you should keep the following factors in mind:
- Your current income that needs to be replaced when you leave
- How long do you want the coverage to last How many dependents you have and their future needs
- Debts you have that will need to be repaid, including mortgage debt, car loans, credit card debt, and medical bills
- The cost of your last expenses
Term life insurance is the most popular type of life insurance purchased today, and for good reason. Premiums can be incredibly affordable, meaning this type of coverage can help you save money on a policy, get a larger death benefit to protect your family, or both.
You can also potentially benefit from term life insurance at almost any age. People in their early 30s will be able to get low premiums because they are young and healthy, while those in their 40s can use term life to protect their family without having to pay the high premiums for life insurance. whole. And even people in their 60s can use term life as a less expensive policy to cover their final expenses.
Our advice: you’ll always qualify for better life insurance rates if you apply as soon as possible, so take the time to shop around for term life insurance in an online marketplace such as political genius and get the coverage you need today.
Not sure if term life insurance is right for you? Read CNN Underscored’s guide to the different types of life insurance.
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