When it comes to life insurance, people have a lot of questions. A few common questions we get from our customers include, “What is term life insurance?” and “How does term life insurance work?” If you’ve had the same or similar questions lately, keep reading!
What Is Term Life Insurance?
Life insurance can be very expensive to purchase and maintain, especially if someone has to stick closely to their budget. That’s where term life insurance can come in handy: Its initial cost is typically lower than whole life insurance and can come with lower premiums to boot, but it only lasts for a specified term.
The ‘Term’ in ‘Term Life Insurance’
There are a few key things to know about choosing term life insurance, beginning with the “term.” Unlike whole life insurance, which doesn’t expire, term life insurance lasts for as long as its specified term does – typically, that’s 10-30 years.
If the policyholder dies during this term, a death benefit is paid to their beneficiaries. If the policyholder outlasts their term life insurance, they can opt to renew coverage (albeit at an increased cost that scales with age).
Do Term Life Policies Have Cash Value?
People sometimes invest in whole life insurance policies knowing that, if necessary, they can borrow cash against their policy value and/or death benefit. This can be a useful financial planning strategy for some, but can one do the same with a term life insurance policy?
Unfortunately, no. Term life policies don’t have any cash value, so it’s not possible to withdraw cash against the policy value or death benefit. This is an especially important thing to consider because any investment in a term life insurance policy won’t realize unless the death benefit is paid. That requires the policyholder to die during the term, otherwise, money spent on term life premiums goes up in smoke.
How Long Should My Term Life Insurance Last?
You’ll want to select a term that makes sense for your age, although maximizing the term is a good goal to have. If you have children, you might want to consider selecting a term that covers the time when you expect them to be financially dependent upon you.
Keep in mind that premiums increase over time, so make sure you take this fact into account when selecting your term.
Do You Need Help Selecting Term Life Insurance?
In many ways, term life insurance is a simpler product than whole life insurance, but that doesn’t necessarily mean it’s easier to understand. If you are interested in purchasing life insurance and are wondering if term life insurance is right for you, don’t hesitate to reach out to Insurance Specialists, Inc. for help!
Contact us online or call (888) 451-0883 now to get answers to your questions!