Term insurance, as the name implies, is designed to insure you for a specific period of time. Term life insurance options are available for 10, 20 or 30 years. As long as you pay your premiums during this period, the insurance provider cannot cancel the policy, nor can the premiums be raised. In the event of your passing within this time frame, your beneficiaries will receive the death benefits. Term life insurance is typically not as expensive as permanent life insurance, providing basic coverage and thus more affordable, lower premiums.
While term life insurance isn't the right answer for everyone, it is certainly affordable and flexible. Term life insurance can offer you peace of mind that comes from knowing your family will still be able to handle the household expenses if something happens to you.
Term life insurance is for anyone who needs life insurance for a limited period of time (say while your kids are young) and wants more affordable premiums than they would pay for whole life coverage.
In general, the savings are greater the younger you are. If you’re a 30-year-old male non-smoker, you could get $100,000 of term life insurance for as little as $10 a month. If you’re 50 years old, the same coverage would cost you about $40. The difference with whole life is that it starts out much more expensive but the premium never goes up.
The amount of coverage you buy depends on what you can afford, and how much money your family is likely to need if you should die.
Some financial advisors recommend getting enough coverage so that your family will be able to make ends meet for 10 to 15 years without your income. If you earn $50,000 a year, that means at least $500,000. Some people want to be able to pay off their mortgage.
The reality is that everyone calculates this amount a little differently. If your kids are older and likely to be able to support themselves soon, you don’t need as much coverage.
Life insurance premiums are never tax deductible if you pay for them yourself. Businesses that offer life insurance to their employees can in some cases deduct the premiums as a business expense.
In terms of life insurance benefits, they would typically be exempt from taxes, just like most all inheritance.
Term life insurance covers most causes of death, including most illnesses and most accidents. Causes of death that may not be covered include suicide, if you’re killed in the commission of a crime, or if you die while doing something that the insurance company would consider reckless, like car racing or other extreme sports.
Exclusions should be clearly spelled out by your insurance advisor, and should be noted clearly in the policy. Most life insurance policies exclude pre-existing conditions, meaning that if you die of cancer, and it becomes clear that you already had cancer when you bought the policy, the claim would not be paid.
Note that as of 2020, many insurers are excluding COVID-19 from new policies.
Yes, you can certainly convert your term life insurance policy into a whole life policy. You might want to do this if you thought your life insurance needs were temporary, but then discover that you will need ongoing coverage past the end of your current term.
Note that when you convert a term life policy to whole life, your premiums will go up dramatically at first. They may double or more. But the benefit is that once you have a whole life policy, the premiums will never go up again unless you change the coverage level.
Term life insurance is the least expensive life insurance option for anyone who needs coverage for a limited time, and doesn’t need something with an investment or savings component. Say you are a new parent and want to have peace of mind while your kids are growing up. Or maybe you’re starting a business and want to make sure your family is protected until the business has been running for a while and is providing a regular income.
Term life insurance is cheaper than whole life insurance, and is available for 10, 15, 20 and 30 year terms. If you want life insurance for longer, or if you want something with an investment element, you probably want a whole life policy.
Feel free to talk to our insurance experts about which life insurance options are best suited to your needs. For free advice and no-obligation quotes, contact Mitchell & Whale Insurance Brokers at 800-731-2228 or email us at firstname.lastname@example.org.