David McEvoy
Term Insurance: Can You Afford Not to Have It?
Losing a family member can create both emotional and
financial hardship on the entire family - whereas having a
secure life insurance plan can help mitigate the costs
involved. This is a benefit with both short and long-term
plans. As you plan for your future, learning about the
value and extensive benefits of your life insurance
policies can help you maximize your investment.
Term life insurance can help your family with any costs in
the event that you pass away, and can help minimize the
risks involved with financial hardship on loved ones. When
a key family member passes, their employment benefits cease
to exist. Although some employers extend special insurance
coverage to the employee's immediate family, this may not
be enough to cover long-term needs and expenses.
Term insurance is commonly known as a ‘pure' form of life
insurance because it only covers the insured for a specific
period of time. The insurance policies will expire after a
certain date, making sure that the policy holder's family
and immediate beneficiaries are covered completely. It can
help to protect a family's financial standing, or make
money immediately available for children's college
education or living expenses.
Determining Term Insurance Coverage
If you invest in a term insurance plan, you'll need to
consider the length and type of the policy you want to
invest in. The insurance policy is a legal document, and
each type of insurance will vary by state or country. Term
insurance is an affordable way to cover any potential risks
in your future years; if you have numerous dependents, you
really cannot afford not to have it. The best coverage for
your family will depend on how many assets you own; if
these are not valuable enough to provide cash after a sale,
your family can be at a severe financial risk. Another
factor to consider is whether you require a death benefit
for a business. Any outlying businesses will require some
form of coverage in the event that you are no longer the
owner. Ultimately, term insurance is designed for complete
financial protection in the event that you pass away.
Annual Renewable and Level Term Insurance
The beneficiaries of your insurance proceeds will receive
the funds free of federal and state income taxes. The
money can be used for any expenses, costs, and even pay off
some debts such as a mortgage or outstanding revolving
accounts. Term insurance can be renewed each year, while
other premium policies can be extended for a specific
period of time. Annual renewable term policies are ideal
for short-term needs and the premiums will fluctuate each
year upon renewal. However, this may become unaffordable
if it is started too early. A level premium term life
insurance plan may be a better option, since this will
cover the insured for a set of years: 10, 15, or 20 years
at a time will be covered at a set rate so there will not
be any fluctuations in payments. Renewals may require an
evidence of insurability, but you will have a chance to
take advantage of more favorable rates.
Key Benefits of Term Insurance
A number of benefits exist for term insurance policies, and
finding an affordable plan can help minimize the costs
involved with alternative options such as permanent life
insurance. Key benefits of term insurance include:
• Beneficiaries are paid the face value of the policy when
the insured dies during the term
• Term insurance generally costs less than permanent life
insurance plans and policies, making it more affordable in
the long-term
• Some policies are renewable and may even be converted to
a permanent insurance status
• A level term life insurance policy can last up to 30 years
• A higher cash value after proceeds are distributed to
beneficiaries
Death benefits are not paid at the end of the term, so
establishing the right amount of the policy is important
during the selection process. Term insurance is the
simplest and easiest type of insurance available. Most
have a renewable feature that will allow you to increase
the premium if any health concerns or life changes occur,
and locking in a secure rates becomes much easier.
Qualifying for various policies can be challenging, but
once the medical evaluation is completed, the physical
examination will easily approve a certificate of
insurability.
What Term Insurance Proceeds May Be Used For
Once the insured has passed away and the beneficiaries
receive the proceeds, term insurance can be used for a
variety of purposes that can maintain your family's
financial health and protect them from hardship. Common
uses for proceeds may include:
• Paying off a mortgage
• Setting up a retirement fund for a spouse
• Covering children's school and college expenses
• Paying off debts such as credit cards or auto loans
• Purchasing stocks for long-term investments
• Covering business expenses
• Cover health costs of immediate family members
• Pay for personal expenses
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