What Is Term Life Insurance and Why Do You Need It?

What Is Term Life Insurance and Why Do You Need It?

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blog image May 27, 2022

What Is Term Life Insurance and Why Do You Need It?

What is Term Life Insurance?

Term Life Insurance is a plan where the policyholder and the insurance company get into a contract that lasts for a specific period, like anywhere between 10 or 20 years. In the event of your death during the term of your contract, the insurance company will pay a death benefit to your beneficiaries in exchange for your premium payments.

Unlike a permanent life insurance plan where the holder gets into a contract that lasts a lifetime, a term life insurance policy expires when the term comes to an end. After the end of the plan, if you are still looking to renew your policy, you can either convert it into a permanent life insurance plan which will be at a much higher premium or buy another term life insurance plan. The reason term life insurance plans are more affordable than other life insurance policies like a whole life insurance plan etc. is that in other plans higher premiums are needed to grow cash value.

Why does one need term life insurance?

If no family member depends on your financially, and your death would not cause any financial strain on them, you may not need to apply for term life insurance. But, if you are the sole earner and need to take care of your loved ones when you are no more, then getting a term life insurance policy is the best decision you will ever make.

 

As mentioned above, a term life insurance plan lasts for about 10, 20, or sometimes 30 years. However, some insurance companies offer certain term life insurance plans that have one and five-year increments. If you are the sole earner in your family, you can opt for a policy that matches you and your family’s needs. If you are a stay at home parent, you may want to get term life insurance to take care of certain services such as child care. Additionally, your family might need to take care of some payments like mortgage, loans etc. when you are no more. If you believe that over time your needs will change, you can apply for more than one term life insurance plan and get extra coverage, as it can be beneficial for you in the latter stages of your life when you need it the most.

 

When your coverage comes to an end, you usually don’t really need life insurance. Your children will be young adults, and most likely, your mortgage will be paid off, and you would have potentially amassed enough savings to live a comfortable and financially secure life. Some plans have the option to convert them into a different insurance plan at any point, while a few plans only allow that in the initial years of coverage.

Conclusion

To find out if you need term life insurance or to know more details, please do not hesitate to get in touch with our insurance advisors to schedule an initial consultation.

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