No matter your age, it’s always a good idea to think ahead and make arrangements for your family in case you were to pass away earlier than expected. Nobody likes thinking about passing away, but taking steps toward getting your affairs in order is one of the best gifts you can give your family if the worst scenario occurs.
One such step could be getting term life insurance, though many people aren’t quite sure what that term means. Instead of doing a general search of “what is term life insurance?” and getting all kinds of unreliable results, check out our guide below to learn more about it.
What Is a Term Life Insurance Policy?
A term life insurance policy is a life insurance policy that only provides coverage if the policyholder were to die during a predetermined time period. Term life insurance policies are contracts that expire after a certain length of time, and you can then decide to enter a new contract or with similar coverage or opt for something more comprehensive.
Like regular life insurance, the premiums you pay every month are based on your current age and health status. Older individuals and those with pre-existing conditions can expect to pay more on their premiums than young or healthy individuals.
What Are the Benefits of Term Life Insurance?
Unlike regular life insurance, term life insurance is a much smaller commitment that mostly serves as a backup plan if something unexpected happens to you. These policies tend to be much more affordable than whole life policies, and they rarely require an extensive background check or intensive medical history.
Generally speaking, some young and healthy people can get hundreds of thousands of dollars of coverage for as little as a few hundred dollars per year. This small investment can help ensure that your family can cover funeral costs and other major expenses if you do pass away.
Who Should Consider Term Life Insurance Policies?
Term life insurance policies tend to work best for younger and healthier individuals that are just starting out or for those who cannot afford more comprehensive or whole life insurance. Obtaining a term life insurance policy for a child may also be appropriate, as they can cover various costs and expenses that can arise during an unexpected and incredibly difficult time.
How Much Coverage Should I Get?
How much coverage you should get from a term life insurance policy depends greatly on how much you can afford or are willing to pay in premiums per month, your current annual income, your age, and your health status.
Many experts recommend taking out a term life insurance policy that will cover at least five years of your annual salary. So, if you make $60,000 per year, your policy should provide at least $300,000 of coverage.
It’s important to plan for the future to ensure that your loved ones will be taken care of in case something happens to you, and paying a small premium each month can give you priceless peace of mind.