Knowing how term life insurance works, how much coverage you need, and how your health can affect your premiums will help you find the best deals and purchase the best policy.
You do not necessarily have to be a licensed life insurance agent to really understand term life insurance quotes.
Read the following straightforward guide and learn everything you need to know to make an educated investment into your family’s future and financial stability.
What is Term Life Insurance and How is It Different From Permanent Life Insurance?
There are two very different types of life insurance products that consumers can choose from: term life and permanent life. While both of these contracts are designed to pay beneficiaries a death benefit in the event of the insured’s death, the policies are different in a number of ways. Knowing the differences between term and permanent life insurance can help you choose the right type of policy for your budget and your goals.
The primary difference between term and permanent coverage is that term insurance is temporary. The term, which is a specified number of years, is the period of time that premiums will remain level. At the end of the policy’s term, the policy owner has the option to let the coverage expire or to re-apply for coverage at their current age. When the policyholder re-applies for coverage, any current medical conditions will be considered. Premiums will also be based at the insured’s age at the time of the new application. Permanent plans stay in force for the remainder of the person’s life, as long as the premiums are paid.
Another major difference to keep in mind is price. Term life insurance is the most popular choice for a reason– it is inexpensive and provides coverage for an appropriate amount of time. Term life insurance quotes can be 5 times lower than permanent insurance quotes. This is because permanent insurance includes a death benefit and the opportunity to earn cash values through investing. If you want to keep your premiums low and you are not looking for an investment vehicle, term life insurance may be the better option.
Which Term is Right For You?
Now that you understand the major differences between term and permanent insurance, it is time to decide what term length might be right for you. For individuals who have a short-term need, a shorter 10-year term might be sufficient. For individuals who have just purchased a home or are in the process of having children, you might want to consider longer 20 or 30 year terms. Most of the leading life insurance companies in the industry offer 10, 20, and 30 year terms. Sit down and really consider how long it will take to payoff your debts and how long your financial obligations will exist. This will help you choose the most practical term for your specific situation.
How Much Life Insurance Do You Need?
This is one of the most common questions asked by applicants. While most financial experts say that some life insurance is better than none, you need to take the time to determine what benefit amount is sufficient. Some insurance agents recommend buying a policy that is 5 to 10 times your annual income to provide replacement income and also to cover debts. Others recommend completing a life analysis needs calculator so that you have a concrete number of how much coverage you will need to cover your funeral expenses, your debt, your mortgage, income replacement, and schooling expenses for dependent children. These calculators can truly help determining how much coverage you need without guessing.
What Might Affect Your Term Life Insurance Premiums?
Requesting term life insurance quotes can help you determine how much you need to budget each month for coverage. Aside from your age, there are a number of different factors that can affect your ability to find affordable coverage. Here are some factors that might affect your premiums:
- Your smoking status
- Pre-existing medical conditions
- Riders you add to your policy
- Height and weight
- Dangerous occupations
- Hazardous hobbies
- Driving record
Life insurance premiums are all based on risk. If you are considered a high-risk applicant, your premiums may be higher than quoted after the underwriting process. Keep this in mind if you have pre-existing conditions that may affect life expectancy.