Term Life Insurance Quotes Life Insurance Quotes and Information
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Term Life Insurance Basics
Life insurance, like all other types of insurance, is a good thing to have in the event that it is needed. There are two primary types of life insurance policies: permanent and term. Term life insurance is the most popular type of policy, as it is often lower in cost and easier to structure than its permanent counterparts. The reduction in cost per $1,000 of insurance allows more death benefit to be purchased within a given budget.
Term life insurance provides benefit protection over specific periods of time. Terms range from 1 to 25 years, with some reaching as far as until age 65 or 80. What does this mean? Essentially, if the insured party dies during the specified term, their beneficiaries will receive the stated death benefit. However, in the event that the premature death occurs outside of the term’s parameters, no death benefit will be paid.
A term’s policy premium is derived in part from the length of term selected. The individual’s age at the time of application, along with their expected mortality rate, helps determine the base premium for a given level term policy. To put this in perspective, a younger individual will be offered much lower rates than someone near or in retirement, as based upon mortality tables, the younger individual is less likely to die during the term period. This is at least what the insurance company is placing their bet on.
1 Year Term Insurance
One year policies are more often called yearly renewable, or annually renewable. The policy’s name says it all. The death benefit is renewed each year, increasing slightly in premium. The buyer can choose to purchase the policy again each year, or they can choose to cancel their coverage. Even with the increases, the premium payments will be relatively cheap in comparison to other policies.
Upon the buyer’s death, the full face amount of the policy will be paid to loved ones, regardless of the cause. Buyers that purchase yearly renewable policies have the option of changing the policy to a permanent policy after a certain number of years. 1 year term policies are typically purchased to bridge a financial gap. For example, a 1 year period before social security or a pension benefit is expected. If an individual’s needs extend beyond a year, a longer term is recommended.
5, 10, 15, 20, 25, and 30 Year Term Policies
The biggest difference between a policy’s varying lengths is purely the time period being covered. When you purchase a term policy, you are provided coverage over the entire period, often without the opportunity for a rate increase. However, the longer the term period selected, the greater the ongoing premium for the death benefit chosen.
Who should get a term policy?
Understanding life insurance is one thing, but it is often still hard to know who should have it and who does not need to bother. The easiest way to determine this is to ask is someone would suffer financially from a person death. If the answer is yes, it is a good idea to purchase life insurance of some sort. The money the family members will get in the event of the insured person death will cover living expenses, funeral costs, and maybe even fund college.
It is never easy to think about the future, especially in terms of the worst case scenario. These groups of individuals need to consider their options with care.
Married Individuals
Married individuals often share everything with their spouse, including income. If one person within the marriage dies, the other is left to pay all of the bills. Even if both spouses in the marriage work, the person left behind would be saddled with the mortgage, car payment, utilities, any debts or loans and many other expenses. Life insurance is a good way to ensure that the remaining spouse has less to worry about.
Married Couples with Children
In today society, many families depend on two incomes. When children are involved, those incomes are even more important and stretched even more thin. When married couples have children, one of the two spouses sometimes even stays home. No matter what the situation is, in order to protect children and the remaining spouse, married people with children definitely need life insurance policies.
Single Parents
Single parents already have heavy burdens to care for their children without much help. These individuals really need life insurance policies to ensure that their children are well cared for in the event of their death.
Stay at Home Parents
Parents that stay at home are just as valuable as those that work. They may not have an income, but they are providing a remarkable service. Stay at home parents tend to the every need of their children, plus they are also saving the family in childcare costs as well as plenty of other household costs. The value of these services could be $40,000 or more each year. When thought of in those terms, it seems obvious that stay at home parents should take out life insurance policies as well.
Retired Individuals
Even retired individuals should look into life insurance. Heirs may have to pay large estate taxes in the event of retired individual deaths and life insurance policies can help defray some of these costs. Or, the death benefit could be used as a low cost method for building a legacy for loved ones.
Single Individuals
Most single people do not feel they need life insurance. They are not caring for anyone and no one depends on them financially. Single individuals still may want a small policy, however, to at least cover the cost of any debts they may have as well as their funeral costs. Plus, one of the largest issues faced by individuals in the future is insurability. In the event that insurance isn’t obtained, and a health issue arises at a future date, the potential insured may be deemed uninsurable by insurance companies. For this reason, obtaining an affordable term policy is often recommended.
Once you have determined that you have an insurance need, you should shift focus to selecting the right type and amount of coverage.
Choosing the Right Type and Amount of Insurance
The amount of life insurance you need is purely a personal decision. People purchase life insurance for two reasons they love someone, or they owe someone. When you consider the amount of insurance needed, determine what the purpose of the contract is. Who are you going to leave the proceeds to? Are you covering a specific period of time, or looking to building a legacy?
A common concern prompting individuals to consider term policies is a loved one’s surviving income needs, typically a spouse. When determining how much coverage your surviving spouse will need, you need to determine what your current household expenses are on a monthly or annual basis. In the event that something happens to you, this amount will need to be generated from investments and/or insurance. A good rule of thumb is to consider that your combined death benefit and investment accounts will yield 5% annually as income, for the duration of the survivor’s lifetime. Therefore, if your annual expenses are $50,000, you would need $1,000,000 in combined assets to generate that level of income.
Once you have determined the amount of coverage needed, you will need to select the term period that best suits your household’s needs. There are different schools of thought amongst financial professionals regarding the length of term that is best for a given financial situation.
Some financial professionals suggest that you purchase a term to cover any financial gaps within a household. For example, if your children are ages 5 and 7, you may consider a term policy ranging from 10 years to 20 years, depending upon whether your concern is to cover until they begin or complete college.
On the flip side, some more aggressive financial professionals suggest that you choose a smaller term period, with the idea that you will convert some, or all of the coverage to a permanent policy in the future. Permanent policies offer a death benefit in addition to cash value build up. Therefore, if you believe your financial situation will improve over time, converting your term policy is a sound financial decision.
Available Term Insurance Riders
When looking at various life insurance policies. it is a good idea to consider adding riders to the policy. Many insurance companies will allow you to add things like a waiver of premium rider to any policy. This would mean that if the insured individual were to become disabled for 6 months or longer, the insurance company would waive premiums until he or she was able to pay again. This rider should remain in effect for the length of the insured person disabled state, even if it is for the rest of his or her life.
There is also an accidental death benefit rider that allows beneficiaries to receive twice the life insurance payout amount if the insured person dies in the some type of unexpected accident. If the policy is for $250,000, the beneficiaries would get $500,000 instead in the event that the death was deemed an accident.
How to Find the Right Policy
Once you decide there is a need for a term insurance policy, the next step is to find the right one. It is a good idea to think about how much coverage is needed before beginning the shopping process. Think about the loss of income that would result from death and any outstanding mortgages or debts that are left behind.
Set a budget and check for term life insurance quotes online. It is always good to check the financial ratings of the company offering the coverage as well. There are life insurance companies in every city and all over the Internet. The best thing any buyer can do is research the various policies and companies until the best policy is located. This can take time and it is worth the effort. However, life insurance is an important thing to address, so do not wait to purchase a policy, because you never know what can happen tomorrow.
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