Should You Buy Term Life Insurance?
Have you been considering buying temporary financial protection to provide for your loved ones but are still wondering if it is the right thing to do? We’ll help you find out.
One thing that we want to tell you right at the outset is that if you are thinking against it, it may not be the wisest thing to do if there are people who would want financial support when you’re gone. It is your life insurance that will protect them in that event.
So, should you pay just about any price for that protection? Not, just about any price. if we look at in general, there are 3 basic types you can choose from according to your need: term, permanent, and universal life insurance.
Here, we will discuss the term life insurance and help you find out if it is meant for you. It is something that you may want if you’re looking for budget-friendly insurance. Its annual or monthly premiums are usually much lower initially than those in permanent life insurance.
Already sounds like a good choice? Well, it may very well be so, but there are a few things that you should know before you buy term insurance.
How Term Insurance Works
Suppose you wish to pay an affordable premium for covering a large financial obligation, for e.g. a business loan, but only temporarily. In this case, you’d buy a term life policy that covers only as long as you need the coverage, say, 10 years or 20 or more, depending on the length of your loan. Your premiums, during the initial term, will stay the same.
But what if the term expires and you still need an insurance? Then you use the renewability feature to get the cover extended for another term, but for an increased premium. This raised cost is because of various reasons, one of them being your increased age at the time of renewal. However, since your insurer has all the information about you, there is no need to provide any new information. Though you can renew it and it renders itself flexible enough for adjustments, it will never offer lifetime cover like permanent or universal insurance.
The cover amount, that will be paid at the time of your death, nevertheless, will be the same as was before renewal in the initial policy. And it will stay the same as long as you keep renewing it. And this cover translates into the tax-free money that will be paid to your nominee.
How can the Increase in Term Insurance Premium over Time be Decreased?
While renewal of term insurance will increase your premium, it may be a wiser decision to switch to permanent insurance through the convertibility feature without having to re-qualify by giving new medical information. Most policies have that feature.
Though permanent life insurance requires a higher premium, the premium stays the same throughout your lifetime, regardless of your age and health condition. So, a seemingly higher premium now may seem like a low premium in your coming years.
What about Employee Life Insurance?
Well, life insurance sure costs less when bought through employee benefit because of group coverage advantages, but what you need to look at is the extent of cover that it offers to you. Is it enough for you? If not, either go for an individual policy or ask your HR department if they can buy you more coverage through employee plan.
Also, remember, that jobs don’t last forever. When you change a job, the benefit will not move with you, and with an increasing age, it will only cost higher each time.
Consulting a Professional Insurance Advisor is Wise
The key to procuring the best plan to protect you family and your possessions is to understand the different kinds of available insurance, the differences among them, and the pros and cons that they have. At times, your needs may be complex and you might not be able to decide. talking to a professional insurance advisor is the wisest decision you will make to resolve your quandary.