Elderly couple

Term life Insurance: Everything You Need To Know Is Simplified For You.

Our experience with Covid-19 has given us multiple insights on risks and instability, with some more expensive than others, highlighting the ever-increasing importance and need for insurance. If you have short-term financial needs such as paying off debts and covering childcare costs, Term Life Insurance could be a good option for you. 

 

Term Life Insurance Policy gives your beneficiaries a cash payout upon your death. The insurance coverage is for a fixed period of time, typically between 10 and 30 years, or up to a certain age. Term Life Insurance does not have a savings and investment component, hence, companies can offer considerable death benefits at lower rates.  

 

Benefits: Lower premiums (Cheaper), Able to choose the duration of the policy (Flexible), Easy to understand (Simple) 

 

Cons: Temporary Coverage (Not Long-Term), No Cash Value (Expires upon maturity)  

 

How Do I Know If Term Life Insurance Is For Me? 

Assess how much coverage you need:  It is important for you to calculate the amount of coverage you need before buying. This varies from person to person and depends on your income and liabilities. A reasonable amount of coverage would be six to ten times the amount of annual salary. 

 

Assess if you are able to cover the premium costs:  A general rule of thumb is to not spend more than 10% of your monthly salary on insurance. Spending more than this amount could potentially worsen your financial position. 

 

Assess if your needs are covered if insured:  A good measure of needs would be using the DIME method (Debt, Income, Mortgage and Education). 

 

Debt: How much debt would you leave to your loved ones? 

 

Income: How much is necessary for your family to remain financially stable even after the loss of your income? 

 

Mortgage: How much mortgage would you leave behind? 

 

Education: How much is needed to cover each of your children’s tuition and college fees? 

 

When do I get Term Life Insurance? 

 

The younger you are, the cheaper your Term Life Insurance premiums will be. Working adults will find the lowest premiums in their 20s, when they are less likely to be critically ill. Similarly, Term Life Insurance for children will be much cheaper. Many think that they are too young to seek Life Insurance. However, anyone with dependents will greatly benefit from buying a Life Insurance early on, by paying the least amount to insure the most financial protection to your loved ones in the case of an unfortunate event. 

 

Conclusion 

 

Term Life Insurance offers temporary coverage for temporary financial needs. However, Term Life Insurance does not cover every situation. It does not cover long-term nursing costs, medical costs when you are critically ill, or pay disability benefits. If you are looking for something more, you could benefit from other insurance plans. If you are: A young newlywed couple, Sole financial provider of the family, Individual with significant debt, Unemployed parent or simply in need of temporary financial solutions, Term Life Insurance would be a good option for you.