What is Term Life Insurance?
Term Life Insurance is designed to provide coverage for a predetermined length of time, usually between 5-30 years, depending on your need for coverage. The death benefit amount is determined when the policy is applied for and the beneficiary will receive the death benefit amount if the insured individual dies during their specified term. Premiums are usually level (unchanging) for the entire length of the policy.
Term Life Insurance is the lowest priced insurance coverage on the market. Term Life Insurance provides the maximum amount of coverage for the least amount of money. Term Life policies are designed to meet the specific needs of the insured over a stated period of time.
Uses of Term Life Insurance
Term Life Insurance provides many benefits for individuals as well as businesses. Below is a list of some of the common uses for Term Life Insurance.
Personal Uses
Taxes - State and federal inheritance taxes may be pre-funded using Term Life Insurance
Mortgage Protection - The proceeds of a Term Life Insurance policy can pay off the balance of a mortgage for a loved one in case of your death.
Funeral - Term Life Insurance benefit can insure that the burden of a proper burial does not fall upon your loved ones at your time of death.
Donations - An individual can fund a Term Life Insurance policy to leave to a charity or as a gift for a family member.
Education - Term Life Insurance proceeds can ensure that education costs for their dependents will be covered if the insured were to pass away
Debt - Student Loans,personal bills, credit card debt and be covered by the life insurance in the event of the insured's death.
Income Replacement - Term Life Insurance can provide a steam of supplemental income to the beneficiary so that they may maintain a certain standard of living.
Business Uses
Employee Benefits - Term Life Insurance can be purchase by an employer as a commonly used benefit for there employee's.
Key Person - A Term Life Insurance policy can be purchased to protect a business from the loss of income and/or profit caused by the death of a key employee.
Business Loans - Term Life Insurance can be purchased to pay off business debt in the case of an owner's death.
How long do I need Term Life Insurance?
The most popular term lengths of coverage are 5,10,15,20,25, or 30 year periods. The coverage period will be determined by your specific needs for the life insurance at the time of purchase. For example, if you are buying the Term Life Insurance policy for your children, you may ask yourself when your children may be financially independent.
How much Term Life Insurance do I need?
A common formula for determining how much Term Life Insurance to buy is to use anywhere from 10 to 20 times your annual income at the time of purchase as your guide. For example, if you make $40,000 per year, you may consider $400,000 to $800,000 in death benefit as an adequate amount of coverage. Your age is also a major factor in determining your specific needs, as is the reason that the coverage is being purchased and the number of dependents you have. The coverage you desire should be carefully considered and as your needs change, additional coverage or reduced coverage may be purchased to stay current with those needs.
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