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There are insurance options that are not popularly known to the public.
Term life insurance is one of them.
Most people are unaware of its benefits or how and when to use it.
If that’s you, it’s Okay that’s what I’m here to show you in a way that’s easy to understand so you aren’t flying blind.
Let’s start with what Term Life Insurance is.
If you notice the word Term is what makes this life insurance policy different from the others.
In plain terms, this life insurance type is good for a finite Term; hence Term Life.
What Determines the Term it's assigned to?
One very important thing to remember that will save you from making a big mistake with term life insurance is understanding this:
You will eventually have to lose the policy if you outlive the term.
Also, understand that according to Minnesota.gov that most companies will not allow you to set the term past your 80th birthday.
In other words, it’s a delicate policy.
It’s meant to be specific and the insurance company isn’t in business to lose money.
Are you starting to get the picture?
Great. Let’s move on.
So, how does one choose a term?
What type of dynamic should you have for Term life insurance?
Types of Term Life Insurance
Not the premium or the death benefit changes over time.
Premium and death benefit decreases over time.
There are only really 2 types stated above.
The myriad of ‘types’ shown elsewhere is a confusing hodge podge of riders and other types of add ons.
But, to make things simple I have named the two. In the chart below you’ll see how they use common sense and some medical and lifestyle information as well as age and gender to figure out what is going to be affected.
Annual Renewable Term Life
The many facets and conditions of Term life insurance.
It’s important that you speak to a live agent.
This is not the type of insurance you buy online without questions asked.
In some cases, depending on the insurer, you won’t be able to buy it online. This is a good thing and here’s why.
Term Life insurance, as I’ve addressed, is a plan that pays a death benefit if the insured passes away while the Term life insurance is in place.
This is not an insurance policy like car or health insurance.
There’s nothing to cover or not.
It’s money that is kept out of reach until a death benefit is paid.
So, though there is no interest gained like in other investments, the benefactor or you if you have a returned premium rider can use it for anything you need it for.
So why cover what it doesn’t cover in this case? Simple.
I want you to get a full picture of not so much what it doesn’t cover but what you can’t or shouldn’t use it for.
It’s not a savings account. Sure, you can save money in it but again, at no interest there may be no point.
If you have a reason to keep money from your hands for an extended period of time as a form of discipline then go for it.
Recap of Things to Remember:
You must have a premium return rider to collect the premium payments back.
You lose the payments and policy if you outlive the policy without the rider.
You can leave your money to a charity of your choice.
I think you have an idea of what a Term life insurance really is. It’s quite simple and has a specific function.
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You choose policy length
Provides life long coverage
Premium stays same for policy duration
Death benefit remains level
Accumulates cash value that can be borrowed from
Policy receives dividend payments
I’ve added an extra section here to help assist you in making a decision regarding what you could use a Term life insurance policy for.
This is an expense that everyone will face. Since you won’t be around to deal with it yourself, your loved ones will appreciate it all being paid for.
A term life insurance policy put carefully in place will do this.
Please remember that if you’re young enough to discuss the policy payback rider and also the renewal of terms.
Do all that you have to not to let it lapse.
Whether you have long-term-care insurance or not, it helps to have it behind you for a supplement.
The way things are going in this world, none of us know where Social Security insurance will be and we need a bit of padding for later.
Just watch those expiry and renewal dates otherwise it will all be for naught.
Ah yes the fated credit card debt that’s still very much alive after you aren’t.
Their portion and your portion is now in the cosigner’s hands.
Help your cosigners be free of extra debt, after all they took a risk in helping you thrive, pay them back with some safety if something should happen to you.
When you leave a legacy to your next of kin you are giving them something to remember you by.
You may also be helping them get started in life or paying for college education.
A legacy is as worthy an action as any of the other more practical or specific reasons.
If something should happen to you how will your spouse or even adult children deal with this?
It’s a wonderful and appreciative way to use Term life insurance.
You can insure your family can still pay the mortgage.
You can also save it for your own mortgage or any future purchase if you time it all correctly with the suggestions and education given in this guide.
If you should pass, the kids will still need care.
This is one of the most expensive bills that one has. You can provide that safety net.
(Find out how much your insurance will cost with the calculator below:)
As you can tell from the chart below, this type of insurance is a lot more affordable than the other types of insurance.
This is because of the nature of this type.
Whole life insurance is more expensive because it covers your whole life.
This policy is for a set time period.
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As far as who needs Term life insurance I can honestly say that anyone and everyone can use it.
The whole point that i’m trying to drive home with Term life insurance is the care it takes in the planning.
Anyone can use it and it’s a beneficial thing but must be done correctly. I can’t reiterate that enough.
No. You can’t let it lapse and you can’t cancel and get a refund.
If you don’t pass away in the term you have set, or if you cancel it you won’t get any type of refund or cash out.
This is where you purchase a rider to give you back the money at the end of the term.
It is tax-free. However, it won’t be worth it for everyone and here’s why.
It earns zero interest while in the policy. It’s only a forced savings vehicle at best.
It’s not extra money. So, even if you do use it as a forced savings vehicle, think about how much you will get out of it. You only get what you put in, no more.
You can save a good chunk of money that you can’t touch, yes, but, if you can’t afford a high premium then you may as well just put money in savings.
If you’re a person that’s making a lot of income and you can afford to put a lot away it may be worth it. Moreso if you have family you want to protect incase of your untimely death.
They are not taxable except when the following conditions are present:
Third Party Policy Gift: Example: You buy a policy for your grandchild.
That grandchild makes their spouse the beneficiary.
What is my financial situation?
What can I afford to regularly sacrifice each month or in one lump sum that I can’t touch?
What is my goal?
Your honest answers will tell you what you need to know.
Alright, so now an even simpler formula.
How much Term life insurance you need is the amount it will take for the goal you have for it when it’s cashed in.
Now, this may take a little bit of research into the future.
Things change and it won’t be perfect but you need to have an idea of how much you will need, for what and when.
Let’s go into that for a moment.
If you want to give your kids or grandkids a college education, chances are they will change their mind about the degree they want to earn.
So, what I suggest is determine when the child may graduate college.
Know what the trends are in college tuition. In other words, get a ballpark figure.
The same can be said for paying for weddings and even a future home for someone. These things have markets.
So, consult professionals in these arenas and they can tell you what figure or range you need to shoot for.
This is all you really need to do. A little common sense and research will make it happen for you.
No. Better to have a Whole life policy for that. The only way Term life can be an asset is to the beneficiary.
The application process is simple enough. The information you need is important.
Beneficiary Information, disbursement and backups: The administrative things you’ll need for each beneficiary are the names, birthdates and social security numbers. Beyond that you must make sure you know exactly the amount you will want to disperse to each beneficiary. Yes, you can give whatever percentage per person that you wish if there are more than one person.
Payment Schedule: This one is easy enough but be sure about the answer. This way you can set it and forget it. Make sure you can make the payments in the schedule you have chosen. You have several choices here.
Other Policies you Hold: They will want to know how much you hold in other insurance plans as well as why you are applying for multiple policies.
Criminal Record or Misdemeanors: In the last 5 years typically they’ll want to know this history. This is risk factor determination.
Future Adventures: This takes honesty and you need to be. Due to the fact that they are insuring you for life, they don’t want to push it. In other words, it is a Term life policy for a shorter period. If you intend on climbing Everest at that time, you may not get the policy. If you don’t tell them and you die doing this activity or something as risky then your benefactors won’t get paid.
Family Health History: Your family health history can impact your life. They will want to know if you are related to anyone in the immediate family with certain issues. Parents and siblings are scrutinized.
I think so. Why? Because it’s a shorter term commitment that can make a lot of people very happy.
We take our finances for granted.
We don’t always realize what it takes to make dreams come true or to safeguard our loved ones.
I personally believe that there is a lot of value, when done properly in a Term life insurance policy.
In conclusion, I strongly recommend a policy for those that are starting to build a life.
Term life does help to safeguard those around you and serves as a protective shield to others.
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