How to Decide if Term Life Insurance is Right for You

Life insurance is available in two forms: term life and whole life. Both types provide coverage if the carrier dies, but they vary greatly in cost and terms. Because term life insurance policies are generally inexpensive compared to whole life policies, many people tend to choose this type of life insurance. Here are tips to decide if term life insurance is the right choice for you.

Instructions

1. 

   Look closely at your finances to determine how much life insurance you need.

   Determine how much money your dependents will need in the event of your death. The dollar payout of your life insurance determines how much the yearly policy will cost. In most cases, people consider how much money it would take for their dependents to live on for several years after their death, how much debt needs to be paid off or how long it will take the beneficiaries to begin to support themselves. The age of the person's children should also be taken into consideration.

2. Decide how long you need to carry a life insurance policy. With term life insurance, you choose a policy for a specific number of years -- such as five, 10, 20 or 30 years -- for a set yearly fee. Once the time period ends, the policy expires. Whole life insurance covers you for life as long as you pay the premiums. If you only need life insurance until your children are grown or your house is paid off, term life insurance is the right choice.

3. 

   Decide how much money you can afford to pay for insurance premiums.

   Evaluate how much money you can afford to pay for life insurance. Whether you pay your premiums monthly or yearly, it's important to buy insurance that will fit into your budget. Term life insurance costs far less then whole life insurance and may be within your budget. However, if you are looking for life insurance that will grow like an investment, whole life insurance is what you want.

4. Look at whether you have any additional circumstances. Do you have a child with special needs who needs care long after you're gone? Do you own a business or several properties that will need additional money? These additional circumstances can help determine if you should by term life or whole life insurance.

5. Consider your current age and health and whether you will be able to obtain life insurance as you grow older. Term life insurance can only be purchased for a maximum of 30 years, so if you believe it will be difficult to buy life insurance after that time period, consider whole life insurance instead.

6. 

   After you decide what your needs are, talk to an insurance agent.

   Talk to an insurance professional to determine the right path for you. After you decide what your needs for insurance are, talking to an insurance professional will help you decide which policy will suit those needs.

Tips & Warnings

• Keep your insurance premiums within reason. There is no need to stretch the budget in order to have a high payout life insurance if it isn't completely necessary.

• Don't let yourself be talked into an expensive life insurance plan that you don't need. Evaluate your needs and then choose one that is right for you.

References

• SmartMoney.com: Term or Whole Life?; September 2008
• Bankrate.com: Shop for Life Insurance; August 2007