| Many people may not realize that an
affordable alternative to costly permanent life insurance policies even
exists. They hear the often steep rates that come with a permanent (or
whole) life insurance policy, and think they cannot afford life insurance,
and may consequently leave their dependents uncovered. But an affordable
alternative does exist, and that is term life insurance.
There are two basic types of life insurance: term life insurance, where
you choose the coverage amount and length of the policy; and whole or
permanent life insurance (of which there are many variations), which
combines an investment product with life insurance.
Below are some of the advantages to buying term life insurance:
- Whole life insurance is expensive, due mainly to its investment
aspect, while term life insurance is very affordable. Whole life insurance
policies often cost thousands of dollars a year, as opposed to the mere
hundreds of dollars a year that the majority of term life insurance
policies cost consumers. For example, if you are a healthy, non-smoking 35
year old male, you can get 10-year, $100,000 term life insurance policy
for as little as $8.50 a month (or as little as $8.08 a month for a
comparable female).
- Term life insurance is simple to understand, and allows for personal
choice. You pay a (low) monthly premium based on the term length and
amount of coverage you choose. That's it. Simple. You can choose term
lengths such as 10, 20 or 30 years, and coverage amounts anywhere from
$100,000 to several million dollars.
- You can invest your hard-earned money yourself, rather than having an
insurance company do it for you (as with whole life insurance). Insurance
companies are often very conservative with how they invest your money. If
you are at all savvy in investing, or good at saving, the extra money a
whole life insurance policy costs may not be for you. Instead, buy a
cheaper term life policy, and invest the money you saved yourself.
- Term life insurance is good for short term needs. Two good examples of
this are to cover your children's college education, and to cover your
mortgage. Parents could buy a policy that expires after their children
graduate from college, to ensure that the full education was paid for in
case anything were to happen to the parents. Or, the main breadwinner in a
house could buy a term policy that matches the length of his or her
house's mortgage.
Here are some additional term life insurance tips:
- Buy enough life insurance to meet your needs; life insurance is not
the place to skimp. Especially because term life insurance is so
affordable.
- Also, match the term to your needs. Make sure your dependents are
covered until they can provide for themselves, or that your spouse is
covered until retirement income becomes available.
- Buy when you are healthy, and try to match your terms to when you will
still be healthy. When you get into your 50s and 60s, it may be harder to
find affordable term life insurance. So buy a term that you can renew
before you get too old, or one that is long enough to cover you well into
your retirement.
- Don't lie on your policy; as life insurance companies will investigate
before paying. If you do not admit to a habit, behavior or health risk on
your application, your beneficiaries may not receive the money after you
pass away. That is the whole point of your life insurance policy, to leave
money for those left behind, and it would be a shame if they didn't
receive what you had paid for because you were not truthful on your
application.
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