Life is full of unexpected twists and turns. But how would your loved ones be taken care of if something happened to you? Term life insurance offers a safety net that provides peace of mind in case of the unexpected. It can help you and your loved ones prepare for the future, no matter what it may bring. In this article, we’ll consider the pros of term life insurance and the options available to you.
What is term life insurance?
As a type of life insurance, it provides financial protection for a specified period or term. It offers a cash payout to your family if you die during the term of the policy.
Unlike other types of policy, like whole life insurance, term cover has an expiry date. This means it only pays out if you die within the policy period. However, it is much more affordable than other types of life insurance, making it ideal for those on a tight budget.
Which type of term cover do I need?
There are 3 types of term cover available – level, increasing, and decreasing.
Level term life insurance is the most common type of policy. It pays out a fixed amount if you die during the policy term. Ideal for those looking to provide financial security for their family or dependents.
Increasing cover pays out a rising sum of money as the policy progresses. This is useful if you’re looking to cover something like inflation or the rising cost of living. The premiums also increase in the process.
Decreasing cover is often used to cover a mortgage or large loan. The payout decreases over time as repayments are made, so your family can pay off the balance if you die beforehand.
Benefits of term life insurance:
Term cover has several benefits, making it an attractive option for families. These include:
Financial Protection: Term life insurance provides a death benefit that can help cover various expenses, such as funeral costs, outstanding debts, and future financial needs.
Affordable Premiums: Compared to other types of coverage, term life insurance tends to have lower premiums. This is ideal for people on a budget.
Flexibility: You can choose a term that aligns with your specific needs and adjust the cover amount where fit.
Temporary Cover: Policies provide protection for a set number of years. This makes it suitable for people who have obligations, such as a mortgage.
Considerations when choosing term life insurance:
When selecting a term life insurance policy, there are a few factors to consider:
Cover amount
Determine the amount of cover needed based on your financial obligations, such as mortgage, debts, and future expenses. That’s why it’s important to ensure that the death benefit will be enough for your loved ones.
Term length
Consider the length of the term based on your specific needs. For example, if you have young children, you may want a policy that covers you until they are financially independent.
If you’re looking for a permanent policy, you’ll want to look into a whole-of-life policy. As the name suggests, it protects you for the foreseeable future, paying out no matter when you die. However, premiums for this type of policy are usually more costly.
Premiums
Compare premium rates from different insurance providers to find the most affordable option that offers the coverage you need. Keep in mind, that premiums increase as you age, so think about applying for cover at early for the best rates.
Your premiums are determined by a number of factors such as:
Your age
Health
Type of cover
Policy term
Smoker status
Occupation
Depending on the provider, you may be asked to fill out a medical questionnaire. This is used to determine the risk to learn of any medical conditions you may or may not have.
Answering these questions honestly and accurately is essential. If not, your insurer could cancel your coverage later on. Worse still, they could deny your family a payout.
Joint cover
Consider joint cover if you and your partner are both dependent on each other. These policies offer a death benefit to both parties, so either is protected if something happens to the other.
In certain cases, it can work out cheaper than buying separate policies. Therefore, many couples decide to take out a joint policy.
Insurers typically offer two types of joint cover:
First death: pays out to the surviving partner in the event of either insured’s passing. This can support them to maintain their standard of living.
Second death: pays out after both policyholders pass away. This helps to see that your children are provided for, even after both parents pass away.
Adding critical illness cover
Many term life insurance policies offer the option to add critical illness coverage.
It provides a lump sum payout if you are diagnosed with a critical illness during the term. In terms, this provides an additional safety net aside from death. While you are unable to work, it can help with mortgage payments and other living costs.
Term life insurance provides a safety net for the unexpected, offering financial protection for a specified time. It is a flexible and affordable option that can provide peace of mind for individuals and families.
When choosing a policy, consider factors such as coverage amount, term length, and premiums. By selecting the right policy, you can ensure that your loved ones are taken care of in the event of your untimely death.
LivingBetter50 is a magazine for women over 50, offering an over 50 magazine free download for women of spirit!