What is term life insurance?
It is basically life insurance, but the coverage is only for a fixed time period. Term life insurance is usually the most affordable type of life insurance as its benefits are limited to a fixed period. In most cases, the term life insurance policies are likely to expire before a death benefit is paid out. With the basics explained, now how do you know which type of term life insurance policy is the most suitable for you?
This article will be briefly explaining three types of term life insurance.
The first type is level term policies, also known as level-premium policies. Level term policies provide coverage for a specified period where the premium remains the same over the policy’s duration.
The next type is a yearly renewable term. This type of policy is a term life insurance policy that has a period of one year, where policyholders are given a new quote for each new year the policy is renewed. The premium increases along with the age of the insured. For example, someone who is 20 years old would be paying x amount of money and if he renews the same policy at 21, he will have to pay a recalculated premium according to his age at 21.
The last type of term life insurance this article would be featuring is the decreasing term insurance. This type of policy has decreasing coverage over time. This means that the premium decreases along with a declining death benefit. After briefly explaining about the three types of term life insurance, how do you choose which type of policy would be the most suitable for you? There are four things to consider to help in your decision making.
1) Your Current Life Stage
- Analyze your current stage in life, some possible factors to consider include your age and the number of dependents you have. Think about how many livelihoods depend on you, do you have children? Are you married? These are some questions that will help in your analysis of your current life stage.
2) Your Current Lifestyle
- Next, analyze your current lifestyle. This analysis would include taking a look at your spending habits, and your general standard of living. With a clearer view of your lifestyle needs, you will be able to better decide what type of coverage you require and choose the policy type that is best suited for you.
3) Your Current Financial Status
- Another important area to focus on will be your current financial status. As everyone has their own financial responsibilities, it is crucial to analyze your income along with your responsibilities to make sure you are making an informed decision when choosing the type of policy for you.
4) Your Existing Liabilities
- Another important factor to consider is your current liabilities such as any outstanding debts. It is important to ensure that choosing a policy does not bring excessive financial burden to you when it is supposed to be giving you a peace of mind.