Basic knowledge of term life insurance is that you’ll get money if you die all of a sudden and your family will be covered financially after. But, there are several types of life insurance coverage, and each type of insurance provides a different amount of coverage. So, it is important to understand are advantages and benefits, in this case, of term life insurance coverage.
Term life insurance stands for guaranteed payment in the case of death if the insured person died during a specified term. When term life insurance expires beneficiaries can renew the policy for another term. Usually, insurers can purchase term policies that last up to 20 years. However, these policies have no other value than the guaranteed death benefits.
Basic benefits of life insurance policies
Life insurance policies can protect your family’s financial future in a case of an unexpected death, so it is a huge benefit but many Americans don’t have life insurance because they think it is way too expensive. But, that is far from the truth, because these policies can cost approximately 160$ a month.
Several basic benefits include:
- Policies are tax-free: when you receive the money you don’t have to taxes because these policies aren’t considered for tax purposes
- Your family would be financially insured: if you have insurance policies of a large amount, you can insure your family for living expenses and other big costs
- Life insurance can cover funeral costs: funerals can be very expensive so with a life insurance policy money can be used for the cost of proper burial
- It is affordable: life insurance isn’t as expensive as you may think and isn’t just for wealthy people. Everyone can purchase it at a reasonable cost
What are the benefits of having term life insurance?
Term life insurance is a very attractive life insurance policy for younger spouses with children because parents can get a large amount of coverage at a reasonable cost. It is the most affordable life insurance on the market because it provides only a death benefit. Younger people with no health issues could renew this type of policy for 20 years with a value of approximately 250 thousand dollars for just 25 bucks a month.
For example, a young adult who is 35 and buys a 10-year term policy with a value of 300 thousand dollars, pays a monthly premium of 30$. If the insurer days in the ten years his beneficiary will get the whole amount. But, if the insurer dies after 10 years of expiration there will be no benefit. In the case of a policy renewal after 10 year period, premiums will be higher because of the age. The older beneficiary gets the premium gets higher, too.
To conclude, the basic benefits of term life insurance can be:
- Lower cost
- Easy to comprehend- it only provides for death benefit so it is simply an insurance product, nothing more
- It can be switchable – in some cases, you can switch from term life to other types of insurance if want to
- If you drop your policy it will cost you nothing, so you got nothing to lose (just cover the last premium)
Term Life Insurance Available Riders
You can add some additional benefits to your term life insurance policy to expand coverage, such as these riders:
- Accelerated benefit: insurer can get a part of the death benefit if it is diagnosed with a terminal illness or transferred to a nursing home
- Accidental death benefit: additional benefit if insurer dies in some traffic accident
- Guaranteed insurability: provides for additional coverage without a prof of insurability
However, after the expiration of the term- of life policy insurer doesn’t get invested money back.
Term Life Insurance Non-Benefits
As already said, term life insurance coverage is temporary, so it isn’t right for everyone, such as middle age insurers who were likely to get a diagnosis, and monthly premiums are higher based on age and health of the policyholder, so considering other types of coverage would be a better option.
With a term policy, there is no cash value and premium flexibility like with some other life insurance policies. This means that you cannot create a cash value tax-deferred interest that obligates you to pay taxes on your earnings as long as your money isn’t taken out of a policy.
As long-term insurance doesn’t have premium flexibility you can’t pay a lower premium and hold the policy which can be the case with some other insurance policies. You will always have to pay the same monthly premium.
However, the term-life policy can be a great option for younger people with good health because this type of insurance is a low cost, and could help pay, for example, a mortgage, college for kids, or some other major potential expenses in the case of sudden death.
If, you aren’t sure what type of life insurance policy is right for you, call our agent in Better Place Insurance Group who can answer all your questions!