What is Term Life Insurance
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Life Insurance - What is Term Life Insurance? How much life insurance should you have?
Term Life Insurance is a type of life insurance policy designed to pay out a lump sum to your beneficiaries if you were to die prematurely. That is its purpose. You buy term insurance to financially protect the ones you love if you are no longer around to provide for them. The insurance coverage lasts for a specific amount of time (also known as the term, typically 10, 20 or 30 years). Simply put, if you own a term policy and you die during the term then your beneficiaries will receive a fat tax-free check in the amount of the death benefit of your policy.
Term insurance is also known as pure insurance which means that there are no underlying investments or cash value component to the policy. It is not a savings plan, a retirement plan, a college savings plan or an investment account. It is just insurance on your life with the purpose of protecting your family from financial disaster because you are no longer there to provide an income.
You can stack term life insurance policies to cover certain life events. I personally own multiple policies with different terms. The reason for this is I need more coverage while my children are young and then my need goes down as they get older.
Not everyone needs life insurance. The question you need to ask yourself is “Is there anyone that would suffer financially if I were to die? If the answer is yes then you need a term life insurance policy to protect them and remove that risk from their lives. Another important thing to remember is you very well might need life insurance even if you do not have a paying job. Stay at home parents need life insurance because if they were to die prematurely the surviving parent would need to either stay home with the kids for a while or hire someone to watch the children while they are at work.
Term insurance is the most affordable type of life insurance. The younger and healthier you are the less you will pay. Shorter term policies are also less expensive than longer term policies because the risk of death is lower. So for example a one year term costs much less than a 20 year term.
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If you don't have a term insurance policy and there are people that depend on you financially then go get a policy now!!!