What Value Is Term Life Insurance?

If you are a father and died tomorrow, could your family survive? You are probably thinking they may have to sell the house and buy something smaller. But have you thought about what the loss of your salary would mean for their future?

This article will outline important elements that life insurance could cover, types of insurance available, how much life insurance should be purchased, and what should be done now.

Please review the article today and make sure you protect your family's most valuable assets.

Get Your Free Life Insurance Quote!

Why Buy Term Life Insurance?

Why buy term life insurance? Here are some good reasons why:

  • You're married.
  • You have dependents.
  • You have an estate.
  • You own a house that has a mortgage.
  • You have credit card debts or other outstanding loans.
  • You want to provide your children with secondary education.
  • You don't want your family to wonder how your funeral expenses will get paid.
  • You want your loved ones to have money to cover their living expenses.

Don't get caught without life insurance because you think you are young, healthy and think nothing will happen to you. Last year one of my 28 year old married friends - in a picture of perfect health - died prematurely, unexpectedly. Remember, your family's most valuable asset is you and it needs to be protected.

Why Buy Term Life Insurance? Let's Look At Some Facts:
  • Consider this from the National Underwriter, April 16, 2007, "68 million adult Americans have no life insurance."
  • A quote from CNNMoney.com, viewed March 9, 2007, "Stick with term and do your investing elsewhere."
  • And one more from Money.CNN.com, March 12, 2008, "Consumers will find that there are high fees and commissions built into whole life as well as surrender charges."  
  • Here are some quotes on debt: this is from Newsweek, February 1, 2008, "The average household owes 20% more than it makes each year."
  • Another from USA Today, November 10, 2008, "The average household now owes $10,678 in credit card debt, up 29% from 2000."

Are you one of the 68 million? Does your family have debt? If so, you need to consider purchasing some form of life insurance. OK, so you believe you should consider buying life insurance.

Why Buy Term Life Insurance?  Are There Other Options? How Do They Compare?

There are two options to chose from. They are permanent and term insurance. These options are described in more detail below.

Permanent Insurance Option

The basic premise of these life insurance policies is - you pay a premium for some form of guaranteed cash value depending upon the type of policy selected. This type of policy has a higher monthly premium than term.

Payout of these policy types is generally one of two ways. The insured chooses to take the cash value and the beneficiaries receive the difference from the cash value taken and the face amount when the insured dies or the policy is in effect until the insured dies and the beneficiaries receive the death benefit. The critical point here is that the premiums must be current. Otherwise, they will reduce the death benefit for the amount owed.

Borrowing against the cash value of most of these policies is permitted, but such action lowers the death benefit. If the insured decides to pay back the amount borrowed, a loan rate for borrowing will be charged. If any loans remain unpaid at the time of death of the insured, the death benefit will be reduced by that amount as well.

Term Insurance Option

The basic premise of this type of life insurance is - you pay the premium and the insurance company will pay the death benefit to your beneficiaries if you die anytime during the specified term of the policy. If the insured dies after the term is up, no payout is made.

There is no cash value being accumulated during the term for this type of insurance. And, no borrowing can be made against this type of insurance

Term insurance will cost you less than permanent insurance so that you can purchase more coverage per dollar of premium being paid.

Why Buy Term Life Insurance?  It Is The Recommended Option.

  • The premiums remain level (do not increase) for the entire term of the policy.
  • At the end of the specified term, the insurer has the option to renew for another term.
  • Term policies are cheaper than permanent policies and you can purchase a higher face amount of coverage per dollar of premium.

So When Buying Term Life Insurance How Much Should You Purchase?

This is a very important question. It is recommended that you purchase 10 times the amount of your annual salary.  To verify this is enough, calculate the total amount of money needed for the following:
  • Cover your family living expenses
  • Your funeral expenses
  • Education for your children
  • Paying off the mortgage and credit card debts
  • Other outstanding loans

Why Buy Term Life Insurance?  It Makes Sense.

By making provision for these basic needs you will have protected your family from severe money problems well after you are gone. This will help your family enormously when your income is no longer available for them to use.

If you already have a life insurance policy, examine it and answer the following questions:

  • Would it cover your family's basic necessities in the event of your untimely death?
  • What kind of life insurance policy is it?
  • If it is a permanent life insurance policy, would it be to your advantage to convert the policy to a term life insurance policy? If your company would convert it and the premium would be lower, I recommend converting it to a Term Life Policy and investing the premium saved from the conversion in a mutual fund or another investment vehicle.

What Should You Do Now?  Buy A Term Life Insurance Policy.

Don't procrastinate! You don't want your family to end up with financial woes because you died prematurely without insuring their needs would be taken care of at your death.

Get Your Free Life Insurance Quote!

Protect your family's most important asset.

Your family will be glad you took action!