What is Term Life Insurance?
Term life insurance is designed to protect your dependents should you pass away unexpectedly. It’s also the life insurance product of choice for financial gurus like Dave Ramsey, Suze Orman, and Clark Howard.
The three main components that make up a term life policy are:
1. Your Term
You pick a specific time period, usually 10, 20, or 30 years. (Here at Bestow we offer policies with terms as short as 2 years.) A 10-year term life insurance policy means you’re covered for 10 years. 20-year term for 20 years, and so forth.
2. Your Coverage
You pick a coverage amount, usually between $50,000 and $1 Million. This is the death benefit, the amount your beneficiary would receive if they ever have to file a claim.
Good to know: It’s tax free so if you opted for a 10-year term with $1 Million in coverage, that’s the exact amount your beneficiary would receive, regardless of when the claim is filed during the term. Meaning, it doesn’t matter whether your beneficiary files a claim on day 11 or day 3,654 of a 10-year term policy. The coverage amount is the same.
3. Your Premium
Once you buy your policy, your premium (the amount you pay for the coverage) doesn’t change throughout the duration of your term. Premium is usually paid in monthly installments.
Main takeaways: Fixed term. Fixed coverage. Fixed premium.