The How-To Guide to Term Life Insurance

It is believed that approximately 50% of Americans currently own life insurance policies, including term life insurance

As opposed to other types of life insurance, term life insurance covers a specific term at a fixed rate. The policy will only be paid out to beneficiaries if the individual dies within the specified term.

Term life insurance can easily be purchased through various insurance agents throughout North America.

Difference Between Term Life Insurance and Whole Life Insurance

Term life insurance differs from whole life insurance in various ways. Term life insurance tends to be less costly, has no cash value, and is easier to understand than more complex whole life insurance. In contrast, whole life insurance lasts for a lifetime, has cash value, and has a guaranteed return on investment.

Benefits of Term Life Insurance

Term life insurance offers affordable premiums, is great for temporary and short-term needs, and is often not subject to income taxes.

In addition, term life insurance policies are often convertible into longer-term policies.

Types of Term Life Insurance

Four main types of term life insurance are available. 

  • Convertible Term Insurance can be converted into whole or permanent life insurance.
  • Annual Renewable Term Insurance means that the insurance can be renewed yearly at an increasingly higher rate than the previous year. Although premiums may be higher, one advantage is that the policy is guaranteed to be approved.
  • Increasing Term Insurance allows one to increase a death benefit over time.
  • Mortgage Term or Decreasing Term Insurance means that the death benefit decreases over time. However, premiums remain the same, despite this decline. The purpose of this type of insurance is to match the decline of the benefit to one’s decreasing mortgage.

How to Buy Term Life Insurance

Firstly, one should decide how much life insurance is needed and for how long. Since term life insurance is meant to replace one’s income in case of death, a good rule to follow is 10 times one’s salary before taxes. Term life insurance can be purchased for 10, 20, or 30-year terms. If one is in his or her early 40’s, a 30-year term is recommended. In contrast, for someone who is in his or her 70s, a 10-year policy may suffice.

Secondly, compile one’s medical history for the insurance questionnaire. Questions will include height, weight, family medical history, occupation, smoking status, among others. It is best to be truthful, as omissions may result in the policy becoming void. Many policies will also require a medical exam, although it may be possible to forgo the exam for a higher premium.

Thirdly, choose an insurance company with a proven track record and sufficient years in business.

Fourthly, do not hesitate to shop around and obtain multiple quotes from various companies. Many companies offer free quotes on their websites. Simply fill out their questionnaire and an insurance agent will be in contact shortly.

In addition, one can attempt to bundle life insurance with existing home and auto policies.

How to Choose a Life Insurance Agent

Choosing a life insurance agent does not have to be a difficult process. One of the simplest ways to find an agent is to ask friends, coworkers, and family for referrals and recommendations. Do not hesitate to ask business associates as well.

In addition, it is possible to ask trusted professionals, such as lawyers, accountants, and financial planners for recommendations as well.

The perfect life insurance agent will help one choose the right plan for one’s needs at a great price. They should be willing to explain all advantages, disadvantages, and details. They should also be able to plainly explain the options. Life insurance is often a long commitment; for this reason, it is recommended to choose a knowledgeable, trustworthy, and easygoing agent.

Life insurance agents typically work independently or for a company. Those who work independently can help individuals buy life insurance from a variety of providers. Those who work for a company are only permitted to sell policies from their particular company.

Ensure that the insurance agent is properly licensed in the state or province that they are located. Ensure that the license is valid and not expired.

Ensure that they have a proper educational background and training. Have they completed any additional courses? Do they continue to upgrade their skills periodically? What professional designations has the agent earned?

Ensure that the agent has sufficient experience in selling life insurance. An inexperienced agent will be unable to help one choose the right insurance plan for one’s needs. Do they have a proven track record?

Finally, do not hesitate to browse various customer reviews online.

Term life insurance is one of the quickest and cost-effective ways to protect one’s loved ones in case of death.