If you have ever been on a boat, you have gone through the drill of how to locate the life vests and put them on in the event of an emergency. The life vests are a safety precaution should you end up in the water. While you hope you never need to use them, it is good to have them just in case. Similarly, life insurance is also good to have protection to help out should the unexpected happen. Like a life vest, a life insurance policy could help keep family members and loved ones afloat if something happens to the policyholder.
A term life insurance policy is the simplest and purest form of life insurance. As the name suggests, the policy is good for a certain term and provides a financial guarantee for your family if something happens to you. Usually, term life policies are good for a period of 10 to 30 years. If you pass away during this period, your designated beneficiaries will be provided with a death benefit to help cover final expenses, pay off debts, take care of other financial obligations, and provide supplemental income.
Term life insurance is generally less expensive than a permanent, whole life, or universal life policy. However, unlike permanent insurance, term policies don’t accrue cash value, and you will lose coverage once the policy expires. Most term life insurance plans have a “level premium,” which means that your monthly premium stays the same for the duration of the policy. If you are in the market for life insurance, comparison shopping is the best way to find a policy with premiums that fit your needs. Let’s take a look at how term insurance works.
Contract
Like other forms of insurance, a term life policy is a contract between the policyholder and the insurance company. You agree to pay a premium for a specific period of time from 10 to 30 years. In return, the insurer agrees to provide a death benefit to your designated beneficiaries if something should happen to you. The death benefit is usually tax-free unless the premiums are paid with pre-tax dollars.
Application Process
As discussed, the best way to get a life insurance policy is to comparison shop for the best coverage and rates. Once you receive the quote you want to go with, you will have to complete the application process with the insurance company. Before you can get the policy, the insurer will want to evaluate your specific risks as a policyholder.
Typically, you will need to answer questions about your health and lifestyle as well as complete a medical exam. Depending on your perceived risks, the insurer will set your premium rate. Certain occupations and hobbies will cause your rates to increase. Additionally, if you are a smoker, you could see significant premium increases due to the perceived health risks.
Once you complete the application process, you will need to name your beneficiaries. Depending on your circumstances, you can decide to give all of the money to your spouse or divide the death benefit up among several adult children. Additionally, your beneficiaries don’t have to be family members, as you can leave the money to a trust, a charitable organization, or friends.
The biggest things to consider when getting term life coverage are how long you want the policy and how much coverage you need. Experts agree that you should buy a policy worth around 10 times your annual salary. However, everyone’s situation is different, and your needs may vary. It will be important to shop around for term life coverage to ensure that you get the best policy, coverage, and rate for your situation. If you make your premium payments on time each month, you can guarantee your family peace of mind and financial security.
