What to Consider When Buying Term Life Insurance
Life insurance is policy and a contract between the insured and the insurance company that will provide a benefit to the beneficiary or the owner of the policy in the event of the death of the insured, as long as the contract is upheld on the side of the policy owner and premiums are current at the time a claim is made.
Term life insurance provides coverage at a fixed rate of payments for a limited time frame. When that period expires coverage at the previous premium rate is no longer guaranteed. The insured must forgo the coverage or obtain a new policy at new rates. Benefits will be paid if the insured is to die during the term of the policy and that payment will go to the beneficiary. Term life is used for income replacement needs and not used as a tool for estate planning or charitable giving.
An economical means to purchase term life insurance is for a term not to exceed one year. The premium is based on the calculated probability the insured will die in that year. The likelihood of the insured dying in that one year, as compared to the likelihood of the insured will die in a 10 year time frame is much smaller. The drawback to a one year renewable term life insurance policy is if the insured is diagnosed with a terminal illness but does not die within the year of the term, the insured becomes uninsurable after that one year term expires. Some policies offer guaranteed reinsurability feature that will allow the insured to renew their term life insurance policy without proof of insurability.
Term life insurance is a bargain to be bought when young and in fairly good health. A term life insurance policy is essential for those who have a family as the insurance will provide a financial benefit in the event the insured dies. That financial benefit will help the family keep current with financial obligations.
When buying term life insurance it is necessary to compare rates and plans as well as the benefits distribution. Term life insurance is generally more affordable than permanent insurance policies and is available to anyone who meets the criteria of the insurance company. Term life insurance is more flexible than other insurance offerings and the insured can choose whatever coverage amount they choose. Some who buy term life insurance policies do for the purpose of leaving their beneficiary money for burial and payment of the bills at hand at the time of the insured’s death.
Term life has been called the poor man’s insurance because of its affordability, but it is really the responsible man’s insurance as it is put in place to take care of the financial needs of their family. Term life has flexible terms. The policy can be renewed every year but it can also be renewed every 10 to 30 years with the premiums spread out over that time frame. Term life is an asset everyone should have in place even if just to pay the outstanding bills at the time of the insured’s death.