What Term Should I Get for Life Insurance?
Term life insurance is an insurance product that lasts for a specific period of time. For instance, a person may buy a 10-year term life insurance policy that provides coverage for 10 years and then expires. Buyers of term life insurance should carefully determine how long the policy should be in effect to provide the proper amount of coverage to meet their specific needs.
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Major Expenses
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For most people, the amount of debt owed decreases over time. For example, many young adults are paying on mortgage and other debt. As the balances for these debts decrease and the amount of money saved and invested increases, many people no longer need life insurance. People in this situation may consider buying a term life policy for as long as it will take for them to pay off their house or other large debts. If they have a 30-year mortgage, they may want to choose a 30-year term life policy.
Children
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One of the primary reasons to buy life insurance is to provide for children. Many people buy a term life policy with a term that will last until the children are adults or a little older. By buying a term life policy that expires when the youngest child is 25, the consumer should be able to assure that the child will be financially cared for until she is out of college and able to support herself.
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Affordability
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While term life insurance is inexpensive compared with permanent life insurance, such as a whole life policy, many consumers have little extra money in their budgets for anything beyond living expenses. One way to reduce the cost of term life insurance is to buy a policy with a short term. By buying a five-year policy, consumers can have a low premium. At the end of the five years, the consumer will have to purchase a new policy, but hopefully his financial situation will improve by then allowing him to afford a longer policy.
Other Considerations
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Consumers may want to consider decreasing term insurance. With decreasing term insurance, the amount of death benefit decreases as the policy ages. This type of policy may be a good choice for those with a large mortgage and other expenses that they expect to pay down over time. Many term life policies are renewable or convertible. A renewable policy allows the holder to extend the policy before it expires. A convertible policy allows the holder to convert the term policy into a whole life insurance policy. These policies may be a good fit for those who may have more children in the future and those with a family history of medical problems that may make them ineligible for life insurance in the future.
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References
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