As a typical high school senior, my friend Steve seemed to have life under control. He was a good student and successful athlete whose tireless work ethic and passion had earned a scholarship to his state University to play intercollegiate sports. The plan was simple: excel in his field, get an outstanding education, and perhaps find continued success as a professional athlete. However, tragedy struck. Within a year, his mother unexpectedly passed away. Facing the challenging world of college can try any young person, but doing so while losing the foundation of your family is certainly devastating.
While this heartbreaking situation understandably takes years to work through, Steve was blessed to have had parents who planned. Wise decisions made years before her unexpected passing averted potential financial devastation. Their thoughtful planning for life’s worst moment allowed him to continue to pursue his dreams and heal, without the fear of financial ruin that many would have faced.
Life insurance does not present the easiest topic to write about or discuss. In fact, a majority of families simply ignore it. Research shows that 44% of families in the US do not carry any individual life insurance, and 70% of households with children under the age of 18 would have trouble meeting their daily living expenses if one of the wage earners were to die.
So, what about you? Are you starting a family? Caring for aging parents? Perhaps you have dependents counting on your income. In all of these situations, life insurance is more a necessity than a luxury. For families and other people seeking a particular period of coverage, a term life insurance policy provides financial security without requiring a lifetime of premiums. Here’s how it works:
Coverage and Benefit of Term Life Insurance
A term life insurance policy provides coverage for a specific period of time, or term. You can choose a policy for the stated term and pay scheduled premiums to the insurer during that time. If the unthinkable happens, and you should pass away while the policy is in force, your beneficiary receives the stated value of the death benefit.
Length of Term Life Insurance
With Term policies, you can choose between 10, 20, or 30 years of level premium payments. At the end of the level payment period, the policy is guaranteed renewable to age 95. Although the policy can last until age 95, the premiums will increase significantly every policy anniversary and will likely become unaffordable.
Most term policies can be converted without evidence of insurability. This means that during the level term period, and before age 75, you are able to convert regardless of your health to a permanent policy, such as whole life or universal life. Permanent policies are designed to provide coverage for the entire lifetime of the insured person, not just a stated term. New premiums and other conditions may apply.
Costs of Term Life Insurance
Term life premiums are determined by a number of factors, including age, gender, tobacco use, and health. For example, it will typically cost less to insure a 30-year-old nonsmoker in good health than it will to provide the same policy to a 45-year-old tobacco user.
Additional Thoughts on Term Life Insurance
Unlike permanent life policies, term life policies do not provide cash value. The premiums paid to the insurer are simply the nonrefundable price of coverage for the stated term.
Term life is a sound insurance option for people seeking to provide for their dependents for a set period of time. For more information about whether term life is right for you, please reach out to my office so that I or a member of my team can discuss what your specific needs are, and ensure that you and your family are protected against all risks. ν