The Basics of Buying Term Life Insurance
What is term life insurance?
Term life insurance is the simplest form of life insurance which covers you for a specific period of time, commonly a 10-30 year period. You pay premiums during this specific policy period, and if you were to die during that time frame, your beneficiaries would receive a tax-free lump sum payment.
Most term life insurance policies have a level premium for the length of the term, which means the premiums you pay would never change until the end of the policy period. Term life insurance policies do not carry a cash value like some other forms of life insurance. At the end of the term period, you have the option to end the policy, convert the policy to a permanent policy, renew your term policy for a higher premium, or purchase an all new term life policy.
How much life insurance do I need?
You need life insurance if you have anyone that depends on your income. This includes married couples, people who share expenses together, parents of dependent children, and those with significant debt obligations, such as a home mortgage.
There are many methods to determine the appropriate amount of life insurance. If you are unfamiliar with life insurance, you should talk to a professional independent agent to help you with this evaluation. When thinking about life insurance benefits, you need to determine the costs of those dependents relying on your income. This could be typical household expenses, mortgage costs, and even college tuition for children.
There is one simple rule of thumb for determining an appropriate death benefit amount, that is choosing a benefit that is 10-12 times your salary. This estimation can work for many people, but every situation is unique and it is best to talk with a financial professional to help determine your specific coverage needs.
Do I need life insurance if I have it through my employer?
Life insurance is a nice benefit if your employer provides the coverage. However, there are a few problems with relying only on your employer coverage.
Typically your employer doesn’t offer enough coverage to truly protect your financial situation.
Your employer can end or change the coverage at any time
When you leave your employer, you typically cannot take that coverage with you. This could leave you at risk of having no insurance coverage and your ability to buy your own individual policy could change as you age.
For these reasons, it is always best to have your own individual life insurance policy that stays with you no matter where you are employed and has an adequate death benefit for your individual situation.
How much does term life insurance cost?
Term life insurance is very affordable. The cost is determined by your age, gender, health and lifestyle. As a general rule of thumb, the younger and healthier you are, the cheaper the policy will be. The rates for a term life insurance policy are typically a level premium that doesn’t change throughout the life of the policy.
A healthy male, non-smoker with a $1 million 20 year term policy can cost as low as $30 per month.
A healthy female, non-smoker with the same $1 million 20 year term policy would cost about $24 per month. Females live longer than males and have a lower chance of premature death, so their rates are slightly less than males.
The larger the death benefit and longer the term period, the higher the premium. Your individual rate will vary after the insurance carrier underwrites your health profile to determine your overall risk.
How long does it take to get life insurance?
After applying for life insurance, you can get approved for coverage in as little as that same day, or as long as a couple months. This depends on what the insurance carrier needs to collect to review your health history.
Some carriers offer same day coverage if you meet the requirements of their accelerated underwriting programs. Other times, the insurance carrier will need to collect complete health history which may include a physical examination and blood draw, along with medical records from any of your physicians.
How do I buy term life insurance?
You should always look for an independent insurance agent to help you shop the entire marketplace for the best price for your situation. At Moment Insurance, we make the life insurance buying process easy for you. You can start by completing a quote request here. We then help you compare all of your best options available and select the best plan for your needs. We help you apply online and we manage all the communication with the insurance company during the underwriting process to help get you the best policy at a price that fits your budget. It will only take a moment to get started today.
