Term Insurance
Term life insurance is straight-forward and easy to understand. It offers the largest amount of protection for your dollar. It does not offer the longest amount of protection, however, because it’s not permanent. Term life insurance lasts a specified period of time, called a “term”. The most common term policies are 10, 20, and 30- year terms. Let’s talk about what term life insurance covers.
An Example of Term Life Insurance
If you purchase a 30-year $500,000 term life insurance for yourself and want your spouse to receive the insurance money if you pass away, you would be the policyowner and the insured and your spouse would be the beneficiary. Your spouse would receive the $500,0000 death benefit if you passed away sometime within those 30 years. He or she may use this money for any purpose. Common uses for life insurance money include covering the costs of a funeral, medical bills, credit card debt, mortgage payments, auto loans, and children’s college tuition. Best of all, by law, life insurance proceeds are income tax free!
What You Get with Term Life Insurance
Term life insurance is often referred to as income replacement insurance. Essentially, if you die within the term, the death benefit replaces the money you would have provided to your family. Let’s say your 30-year $500,000 policy costs you $35 per month. If you died in year 20 of the policy, you would have paid a total of $8,400 in premiums, but your family receives $500,000.
At first glance, people are often put off by the fact that their families may never see any of that money and they would be wasting their hard-earned dollars. Half of this is true. If you do not die within the term, your family does not receive the death benefit… but guess what? This means you’re still alive. Is this peace of mind and protection from life’s “what ifs” really a waste?
Term Life Insurance Provides Peace of Mind
You pay for auto and homeowner’s insurance, but do you really hope to receive money from those insurance companies? Most likely not because that means something terrible happened like you either got into a car accident or your house was burned down by a fire. Same with term life insurance. It’s something you buy to protect your loved ones, but you honestly really hope it doesn’t get used.
Term Life Insurance isn’t your only option. Depending on your reasons for getting coverage, there may be better alternatives to Term Life Insurance for your specific situation. Visit our Whole Life Insurance and Guaranteed Universal Life Insurance page for more information.