Buying insurance of any kind is often confusing. In order to compare policies by price, you have to be sure that each policy carries the same benefits for the same amount, and figure in a dozen different factors. It’s enough to set your head spinning in most cases. Want an instant level term life insurance quote?
Term life insurance coverage can be relatively easy to comparison shop. The policy simply covers you in the event that you die before the end of the term for which you are covered.
I don’t know why they call it a term life insurance policy. I think it should be called death benefit insurance—your not alive when it pays out.
How Term Life Insurance Works
Term life insurance will pay out a specified lump sum to the person that you name as the beneficiary in the event that you die before the policy expires. The payout is subject to a few exclusions, most often suicide or other self-inflicted conditions.
Other than deciding if you want guaranteed or renewable premiums, there’s no need to worry about other bells and whistles. So comparing policies is a simple matter of comparing premiums among the various life insurance providers.
Some life insurance companies will offer you policy riders to “enhance” your term policy. The majority of the time these riders will cost extra money. Take a look at them, and if one makes sense and the cost isn’t stupid to go ahead. However, I would recommend not skimping on your death benefit amount in order to afford the cost of a rider.
How Much Coverage Do You Need?
The biggest decision you’ll face is how much life coverage or death benefit protection you need. The general rule of thumb is that, at a bare minimum, you should provide at least enough to pay off your outstanding debts and cover your funeral expenses. The face amount of your policy should cover any remainder on your mortgage and other debts, and provide a cushion to help your family get back on their feet financially after your death. If you have young children, you should also cover your expected annual salary multiplied by the number of years until the youngest is no longer financially dependent.
Some of the financial talking heads recommend 6 to 10 times your annual income in death benefit amount. You don’t need a specialized life insurance calculator to figure this out, the calculator on your phone will work just fine. Ie… you make $50,000.00 a year at 6 times = $300,000.00 level term. Or at 10 times $500,000.00, you get the point.
When I was newly married and about to have kids, I picked a term policy that had 30 years of term coverage and was 8 times my annual income. I made more than my wife so the amount of coverage was a little different, her policy was also for 30 years. Having a level premium made it purchasing on a small budget easier for us.
I then got a little more knowledge with life insurance and did some laddering of polices as our needs would be changing over that time period, this included getting a policy good for 20 years. But, that strategy is not for everyone, especially if you are just starting out.
What Factors Are Considered in Assigning a Premium?
There are a number of factors that may affect how much you (the insured person) pay for your term life policy aside from the amount of the death benefit you choose. These include your age, your gender, the state of your health and any pre-existing conditions, and whether or not you smoke. Smokers can expect to pay higher premiums than those who don’t use tobacco products. Let us know if you smoke the occasional cigar, as most carriers will give you smoker rates, but a few won’t gaff you for having exquisite tastes.
Your auto insurance rates may have a direct correlation to your level term premium payments you pay. How so, if you are a lousy driver or have bad luck and have numerous light shows behind you, your life insurance premiums can be higher. Most life insurance underwriters will pull your DMV report.
Why Should You Buy Life Insurance?
If you are the primary breadwinner or a significant contributor to family income, you should be insured. No one likes to imagine what will happen if they die, but it makes sound financial sense. Potentially, your life insurance benefit can mean the difference between your family keeping the home in which you live and losing it to debt if you are no longer able to provide for them. In general, if you are carrying a mortgage, you should also have at least enough insurance to cover the remaining mortgage so that your heirs aren’t left with an ongoing financial impact. A term policy is right for almost everyone.
5 Tips To Help You Save Money on Life Insurance
- Only buy what you need; you may only need a lower face value.
- Shop around, a discount on your auto insurance might not mean lower premium payments for your life insurance premiums.
- Your auto insurance company (State Farm, Farmers, Farm Bureau, Allstate) may offer life insurance; they tend to be the most expensive. Or they may decline you because the agent doesn’t know how to shop for life insurance based on health conditions.
- Keep in mind your other living expenses; make sure you can afford the coverage you are purchasing. Having a life insurance policy cancel will have to be reported to the next life insurance carrier you choose, they may rate you higher for that.
- Take into other insurance policies you might have that might include death benefits, for example, your employer.
These term life insurance products are not the type of policy considered to be permanent life insurance or whole life insurance. It will not have dividend payments and will not build cash value.
Frequently Asked Questions
Q: What happens at the end of the term?
A: Where you have a term of 10 years, 20 years, or 30 years. There are some term policies which are annual renewable term. This means that it is renewable, but you will pay a higher premium rate each year. Other term policies just cease to exist.
Q: How does your beneficiary get the death benefits? Or How does life insurance work?
A: It makes me happy that I get this question asked. It means to me that someone is truly trying to take care of all the fine details so their loved ones don’t have to. Your beneficiary simply lets the carrier know that you have passed on. They will fill out a claim form, more than likely will have to submit a death certificate. The carrier will process the claim and pay out the proceeds based on the terms of the contract. I can’t tell you exactly because every life insurance term policy has a different language in it.
Q: What Are the Different policy terms?
A: Most carriers allow you to buy a policy term insurance policies in 10, 20 years, and 30-year level terms. Some carriers offer level terms of one-year increments, as well as five years. However, I would caution you that there is not a lot of competition so prices might be higher for these lower terms than say a 10-year term. Get the term length that you can afford without having to worry about lapsing the life policy. Remember you are buying a level term policy with a specific term length. This is just the opposite of whole life policy. Based on your life insurance needs what term length is best for you?
Q: Getting Life Insurance Quotes?
A: No matter where you get your for your term policy, you will be asked similar application questions. What is the coverage amount you want? You would base that on your life insurance needs, A.K.A. what your spouse wants, keep in mind additional funeral costs. How long of a policy term you are looking for. What the policyholder ages are. What you consider yourself healthwise. Please keep these in mind, garbage in, garbage out. Simply put, if you don’t tell the truth it is considered a class-b felony to lie to an insurance company. Getting the lowest life insurance rates through us is easy, and we won’t hound you.
Q: Do I need to have a medical exam?
A: There are term life policies that don’t require a medical exam. …and if you are anything like me, your saying sign me up to not get haveing to get poked by a needle. However, these policies do cost more than policies that have a medical exam. But if you truly don’t care about price as much as crying in front of a stranger, then let us know.
Q: How can I pay my insurance premiums?
A: This is a favorite question of the life insurance company, they want your money. Saying that though! If you want to pay your premium payments monthly most carriers will require you to do an automatic bank draft. If you want to pay by check, they will usually allow you to pay every 3, 6 or 12 months at a time.
Remember, you are getting a level premium policy, so inside that term, your policy will have the same premium on the last day as the first day.