Term insurance is best described as a temporary product. Your insurance term can be different. Term insurance can be purchased from many companies. The terms vary from 5 to 30 year. Many term insurance policies expire between the ages of 75 and 80. The product called Term Life is available up to the age of 100. The best thing about term products is their affordability compared to whole-life. I will explain the reasons behind this and offer my opinion on which product is best for each case. These opinions should not be taken as advice and you are encouraged to speak with your local agent about it. You should consult the appropriate resource for specific information about your state and province as regulations can vary from one state to another.
Basic details about Term Insurance
To pay off a loan, you should purchase this product. One example of term insurance would be to pay your mortgage. A large loan can also be covered by term insurance. Your beneficiary could use term insurance to cover the loan or mortgage if you were to pass away. Or they could pay part of the amount and decide what to do next. Term insurance is cheaper because it doesn’t have to pay out every month. A Term 10 product is a 10-year-term. The price is fixed for ten year, but the cost increases dramatically after ten years. Sometimes, the cost of insurance can rise so high that it is impossible to pay the monthly premium. The same can happen to Term 20 (20-year fixed cost). It is likely that the price at the end twenty years will be at least five times higher than the original monthly premium. This makes it unaffordable, and it expires. Many term policies stop covering you after age 80. 81 years is the earliest age you can get insurance. You’ve paid for term insurance your whole life. These products are great for temporary debt but if you want to purchase insurance to cover burial/cremation costs, you will need something more affordable and permanent.
Permanent insurance is very different. These policies are designed to pay final expenses and leave something for your loved ones. Because there are so many products, this part can be quite complicated. These policies are also known as universal or whole life policies. You can set a price at the beginning. This policy allows you to continue paying the same monthly amount until your policy is fully paid. You can pay it for life, or you have other options that allow you to have the policy paid off in 20 years. This type of insurance is more expensive. It is easy to understand why. The insurance company will have to pay the policy’s face value if you pay higher premiums for whole life or universal products. It does not expire at end of term. It will not expire after a specified age. No matter how long you live the insurance company will cover the full face amount of your policy, in accordance to the contract you signed. Insurance companies are aware of this fact and adjust the monthly premiums accordingly. Permanent insurance is therefore more expensive. The upside to permanent insurance is that you can be certain that your beneficiary will receive the money at your death if you continue paying your monthly premium. Permanent insurance also builds cash value as they age. You have the added security of a cash value in a life insurance policy that increases with age. Permanent insurance is a great product but is expensive for many people. The trick is to keep your payout (face amount) reasonable. A small universal/whole-life policy could be a good option. It could pay for your funeral costs and leave some money for your loved ones. I recommend that you have at least 25,000.
Is it possible to have the best of both?
Yes, it is. I believe that depending on your financial situation, you should have a permanent policy of 25k-50k and an additional twenty-year term rider to cover your mortgage or other expenses related to early death. Your financial situation and requirements will determine the price of your term product. It can range from 100k up to 900k. You are investing money in a permanent product to pay your final expenses. Additionally, you have term insurance that covers your mortgage and daycare costs for a single parent family should anything happen.
My conclusion is that insurance is essential. The amount of insurance you purchase should be within your means. I wish you all the best in your search and I hope that this information has helped to clarify a complex subject. Although I didn’t mention health, I will. The most important aspect of buying life insurance is your health. In most cases, it’s cheaper to be healthy than older people. Because it is cheaper and more affordable to purchase life insurance when you are young and healthy, it is best to do so. However, the cost of life insurance can increase with age. You are on the right track to protecting your family.
Bill was born in Ontario (Canada). From B.C., he traveled to Canada. He traveled from B.C. to Manitoba, and then returned to Ontario after 25 years of education. He currently works in the investment and insurance industry. Visit his website at [http://www.wledwards.com] and click the travel button for more information on travel medical products.
