Term life insurance is a life insurance product designed to protect an individual or his or her family against loss of income in the case of unexpected death. Term life insurance, unlike “permanent” or “whole” life products, only provides coverage for a certain period of time. This can vary, but often, the periods of time are 10, 20 or 30 years.
Because it is limited in duration, term life insurance is less expensive than whole life insurance and other life insurance products. It is a way to acquire a larger death benefit for a lower premium.
With the idea in mind of providing money to replace the income of the insured or his or her beneficiaries, term insurance can be taken out to cover long-term debts (such as a mortgage), university education, death/funeral expenses, or consumer debts, among many other things.
One of the features of most types of term life insurance is that it has a fixed premium amount per year, or per month. This is called level term insurance. This makes it appealing in that it protects the owner of the policy (the person who has to pay the premiums) against future increases and allows for set expense planning. Most level term policies provide a renewal option at the end of the term. However, proof of insurability may be required and the new rate would be based on your age at the time.
One of the often-discussed strategies with term life insurance is “buy term and invest the difference”. This refers to purchasing term life insurance for the lower premium amount (as opposed to permanent or whole life insurance); then, taking the amount you saved by not purchasing whole life and investing it in a long-term strategy, essentially self-insuring yourself and taking care of any long-term financial obligations/debts.
Regarding the timing of term life insurance, because it is offered in different durations, it can really be purchased at any age. However, most experts agree that it is advantageous to purchase it while young – even in your 20’s or 30’s for a longer term – allowing you to get a larger face amount for lower premium. Also, the common wisdom is to purchase five to ten times your annual income. Many people attempt to purchase it with the idea in mind of covering them up through their retirement age, with the thinking being that by that point, their retirement resources could cover any financial obligations.
For more information about term life insurance, or to get quotes, please contact us on our term life insurance quotes page or call us at 877.506.3378.