Coverage on a Budget
Is Term Life Insurance right for you?
If you’ve been reading our blogs (and we hope you have), by now you know that we believe the purpose of having life insurance is to protect your loved one from financial hardship if something happens and you are not there to provide for them. Life insurance is especially important if you have significant financial obligations (i.e., a family, a mortgage, student loan debt, college/education costs for the kids, etc.). The problem that many of us face is, how do you provide this protection without busting an already tight budget? Term Life Insurance may be the solution.
What is Term Life Insurance?
Term Life Insurance, sometimes known as pure life insurance, is pretty straightforward. You pay a set premium amount over a specified time period (the term)and in exchange, your named beneficiary receives a predetermined sum of money if you die during the specified term period. If you outlive the term period and allow the policy to expire, the death benefit is not paid to anyone, and the coverage ends.
What makes Term Life Insurance a good option for some consumers?
- Term is less expensive than permanent life insurance, especially if you purchase it when you are young and in good health.
- Term products are easy to understand. Permanent life products can become quite complicated, and you may end up paying for coverage that you don’t really want or need
- You can purchase enough coverage to meet your specific needs for a set amount of time, instead of the rest of your life.
Term Life Insurance is often appealing to young couples, especially those with children. They can obtain significant coverage for a reasonably low cost, due to their young age and assumed good health.
Term is also well-suited for individuals whose need for coverage may be temporary. For example, taking out a 30-year term policy to cover a 30-year mortgage, or a 20-year term to coincide with young children who will be grown and on their own (hopefully) by the end of the term. These are just a couple of hypothetical situations that might be perfect for Term Life Insurance.
Are there any trade-offs associated with Term Life Insurance?
There are trade-offs that come with the low premiums and simplicity of Term Life Insurance.
- The coverage you are paying for stops at the end of the term period. If you are still alive when the term ends (which is a good thing), neither you nor your beneficiary will receive a benefit from the policy.
- You may have the option to renew the policy for another term or convert the term policy to a permanent life policy — for an additional cost.
- Term products don’t accumulate value and don’t contain a mechanism for accessing your money (loans, withdrawals, surrenders, etc.).
- Some Term products offer a Return of Premium feature/rider that pays you back the amount of premium that you put in. This may result in a higher monthly premium, and there may be other fees and costs associated with the rider.
We want to do everything we can to protect the ones we love, and life insurance can be a valuable step toward financial security. What kind and how much depends on your individual situation. Consult with an insurance professional for help in determining what policy may be right for you.
Sagicor Life Insurance Company, home office Scottsdale, Arizona issues life insurance and annuities . Products not available in all states and state variations may apply. Products have limitations and restrictions including surrender charges.