If you have a spouse, children, or both, and your current and future standard of living depends on the money you bring home each month, then term life insurance is the best financial purchase you’ll ever make! For just a few cents a day you can guarantee that if something unforeseen happens to you, they will not have their future insured.
The purpose of term life insurance
Nothing can be easier than term life insurance. In exchange for a fixed premium, the insurance company agrees to pay your beneficiary (the person designated to receive the proceeds) the full amount of your policy.
This type of insurance policy does not generate any cash value. You simply decide how long you want the coverage to last and pay the specified premium. The longer the duration of coverage, the higher the premium.
Below is an example of a $100,000 policy for a 35-year-old non-smoking male:
A ten-year term policy costs $7 per month, a twenty-year term policy costs $9 per month, and a thirty-year term policy costs $13 per month
Below is an example of a $100,000 policy for a 50-year-old non-smoking male:
A ten-year term policy costs $14 per month, a twenty-year term policy costs $21 per month, and a thirty-year term policy costs $36 per month
How long do you need life insurance?
Most people will need coverage for longer than they think. Consider these reasons to buy life insurance and the appropriate terms:
You have young children and you want to ensure that in the event of your premature death (isn’t all death premature?), college is paid for. In this case, the best would be a 25 or 30 year policy.
You have a mortgage on your home and currently require you and your spouse’s income to make ends meet. Since most mortgages are of the thirty-year type, I would look at a 30-year term policy.
You and your spouse are 50 and empty nester, but both incomes are needed to maintain your income level, including saving for retirement. In this case, the ideal is a policy with a term of twenty or thirty years.
Buy the least expensive policy you can!
Regardless of the insurance company, a $100,000 twenty-year term policy will pay $100,000 in the event of death. Since it does not generate any cash value, it does not matter which company you choose to buy from. The only caveat is that you only want to buy from an insurance company that has an “A” rating or better from AM Best. These are the companies with the strongest financials. On my website you can buy the rates of the best life insurance companies in the United States.
Shopping is critical because fees will vary significantly from company to company. Rates for a $250,000 thirty-year term policy for a 40-year-old woman, non-smoker and no physical, can range from $24 per month with the least expensive insurance company to $36 per month with the most expensive insurance company. In all cases the death benefit is identical. My suggestion is to buy the least expensive plan!
If you’re healthy: switch plans and save money!
Term life insurance rates have been steadily declining for the past thirty years. Just because you bought a twenty-year policy five years ago doesn’t mean you can’t save money or extend your coverage for the same premium by switching companies. Unlike cash value life insurance, you have nothing to lose if you switch plans. But you may have a lot of money to lose if you don’t change. And in today’s economic world we must make our dollars work more for us!
48% of Americans die without leaving life insurance benefits
While the fact that 40% of Americans die without leaving any life insurance benefits behind is shocking, another 21% of Americans reported that a loved one died without leaving enough life insurance. These statistics raise the question: why wouldn’t an income-earning spouse or parent purchase life insurance to protect the future of their dependents?
One study found that many people put off buying life insurance because they found everything too confusing. I have very good news for those people! Term insurance is simple. You just choose the number of years you want coverage, get some rates, and then choose the least expensive policy.
Another reason many people don’t buy life insurance is because they don’t want to deal with an insurance agent. These people see insurance agents as little more than salespeople and nobody wants to be sold to them. There is also very good news on this front. As a result of advances in technology, there are websites like mine where you can get a quote and sign up without ever talking to an insurance agent, unless of course you want to!
Term life insurance has never been cheaper
A 35-year-old nonsmoker can get $100,000 of twenty-year term life insurance for $9 a month. This same individual can leave her family the same twenty-year, $250,000 term life insurance for only $4 more per month.
So don’t put off protecting your family’s financial future.
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