The two main types of life insurance are: term life and permanent. Both insurances have their own particular form of coverage for you and your family.
Term life insurance is often touted for its “pure insurance protection,” which does not include any of the cash value attributes inherent in whole life policies. It covers you for a certain period of time, usually 10, 15, 20 or 30 years. You can also buy term insurance that covers you until you reach a certain age, usually 65 or 70 years old. Term insurance policies end at a set time and if you don’t die within the term, there is no policy payout. If you die within the deadline, your recipients accept the money tax-free.
Some people may not like the idea of life insurance, however, it is an essential means of protecting your family against the financial burden that estate taxes can bring upon your death.
In general, you purchase term life insurance to protect your loved ones from debt or to provide for short-term obligations. For example, if you and your spouse own a home and you die tomorrow, your spouse would have to pay the mortgage on their own. If you had a policy, your spouse could accept an adequate amount of money from the policy’s death benefit to pay the mortgage.
Term life insurance is the easiest form of life insurance to understand. In short, the insured pays a minimum premium for every thousand dollars of coverage on an annual, semi-annual, quarterly or monthly basis. If you die within the term of the policy, the life insurance company will disburse the beneficiary the face value of the policy.
It’s a great thing that you’ve decided to get a term life insurance policy. But while you’re at it, you need to understand a few things. There are things you can do to ensure you get the lowest price without compromising the coverage you’ll get.