Term life insurance is exactly what it sounds like – it’s coverage you buy to replace your income if you die within a specific period of time. Its purpose is to provide funds to your loved ones so they can settle debts, pay for living expenses, and have some sense of security. Term life insurance is usually the most affordable coverage you can purchase.
How does term life insurance actually work?
The goal is to replace the income you would have provided or, in the case of stay-at-home parents and caregivers, to fund the services your family will need to hire out in your absence. An income is fairly straightforward to calculate, but have you ever considered how much your family would need to have someone take over the laundry, cooking, cleaning, shopping, carpooling, education, and other tasks in a household?
Policies cover a set period of time (terms are usually 10, 20, or 30 years) and provide a guaranteed death benefit (usually starting at $50,000*). The cost of the policy (the premium) depends on several factors, including: your age, the term, the amount of coverage, and any extra riders you might choose to add. Premiums are paid annually (or as noted in the contract) and remain the same for the entire term. Once the term is over, a policy can usually be renewed, though the premiums will gradually increase each year. Many policies can be renewed, some may be convertible to a permanent policy regardless of health issues, and some have a return of premium option. In addition to the variety of terms and coverage available, riders can be added to many policies to cover long-term care, terminal illness, death of a child, and more. Your advisor can give you the details you need to select the right term, coverage amount, and potential riders that will benefit you the most.
Not making a decision IS a decision.
No one likes talking about what happens in case they pass away, but knowing there are a wide variety of term life insurance products to meet your future needs, your current budget, and your financial plans can bring peace of mind. Choosing how to best provide for your family is one of the most important decisions you can make.