Term Life Insurance: The 101 and More
Life insurance, the ultimate adulting to-do (and the motive behind many investigations in our favorite true crime podcasts).
While we all get it’s important to have, few of us actually buy our own individual policy for various reasons. But did you know that term life insurance is actually the simplest and least expensive of all life insurance products?
You’ve probably heard of at least a few other types (whole, universal, variable, etc.), but for the purposes of this article, we’ll just focus on term life insurance and why it’s a great choice for many Americans.
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.
What Isn’t Term Life Insurance?
Term life policies don’t have a cash value — meaning the money you pay for coverage won’t be returned to you at the end of your term if a claim is never filed and paid.
Term life insurance isn’t an investment vehicle. (If that’s what you’re after, there are other more expensive, more complicated life insurance products out there in the market that a licensed agent would be thrilled to talk to you about.)
But don’t think of this as a negative. In fact, it’s actually a positive because this makes term life policies much more simple and affordable. You don’t need to worry about paying more or investing to build up the coverage amount over the years. What you buy is what you get. Period.
How Much Life Insurance Do I Need?
Well, that’s a personal question. Some families opt for one year’s salary while others opt for five or more. We can’t provide an exact answer, but here are just a few things you should definitely consider — beyond funeral costs:
Loss of Income
- Does your spouse depend on your income for monthly expenses?
- Do you have a mortgage, car loans, or other kind of debt?
- Do you have children? (Think about childcare, housekeeping, college costs, and more.)
- Do you have aging parents who require financial assistance?
- How long will your family/beneficiaries require financial assistance after you’re gone?
Every situation is different, so take time to evaluate your family’s needs and buy the appropriate amount of coverage.
How to Buy Term Life Insurance
In the traditional way of buying life insurance, you meet with an agent to get pre-qualified and maybe get a quote. Then you’d fill out lengthy paperwork asking about your personal medical history as well as your family’s, see a doctor for a medical exam and lab work, and maybe even do some additional interviews in order to get a rate. This process can take several weeks. Meh.
Fortunately, with us you can buy it in minutes, online, and no medical exam is required. With Bestow, a healthy 25-year-old female can buy a policy for as low as $2.50/month (really!). If you are older or want more coverage, our prices are still affordable. Lower prices don’t mean lower quality though. We’re backed by two industry giants with A+ financial ratings.
Term life insurance is a great option for many families, especially if you choose a smarter life insurance provider. 🙂 Apply for coverage with Bestow today.