Term life insurance is coverage for a set amount of years that will provide your family or other designated beneficiary with a total sum benefit in the event of your death during that time frame. It is a great choice for those who are working toward financial security for the future but want to provide for their families if something were to happen to them before reaching that point. When looking at term life insurance options, there are several aspects to account for when deciding what makes the most sense for the people who rely on you.
When considering term life insurance, think about the needs of your family. Are you bringing in the sole income for your family? Will your spouse or older children be going to college soon? Are you the at-home caretaker for your young children or a relative with special needs? If you were to pass, determine if your family would be able to survive without your earnings or bearing the cost of care you provide. You also may want to ask yourself how they will cover any medical bills, funeral costs or debts left behind. Term life insurance is a way to give security to your family or loved ones should the unexpected happen during a time when they may not be financially ready.
How Long Will You Need It?
Term life insurance is set to cover you for a specific time. Usually, policies can start out as few as 5 years and go up to 30. If you are in a secure place with your finances but have a dependent off at college, you may want to take out a 5-year term that would help cover their tuition and expenses. If you are just starting a family, a 30-year term could work better for you as you pay off your mortgage and your children grow to reach independence. The length of your policy should be decided by the current and future requirements of your family or other beneficiary. If you pick a lower term and later realize you may need more time, talk to your agent about extensions.
Amount of Coverage
The amount of the death benefit in your term life insurance depends on your individual needs. Take stock of your current debts, your yearly income and future events that will rely on that income. Estimations of what you will need financially during the policy’s term can help direct you in choosing your benefit coverage. In the event of death, your beneficiary or beneficiaries will receive this chosen amount and can cover things like the remaining payments for a mortgage or vehicles, funeral expenses, college tuition and providing extra financial comfort for your dependents. Discuss options with an agent to find the best amount for your family’s well-being. Keep in mind, if you have directions for what the benefit should be used for, discuss that with your intended recipient and consider including it in your will or trust. Be sure to consult a lawyer if you want to control how the death benefit is to be used.
These conversations can be hard, but it’s important for you to choose a beneficiary or beneficiaries and talk with them about your policy. Choose the person or people who you feel is best for being responsible for your benefit. If circumstances change with the person you first designated, make sure to update your policy to reflect a new beneficiary. Also, keep your beneficiary in the loop if you make any changes to your amount or the details. Remember that it is a good idea to pick a primary and a contingent beneficiary. For example, if your spouse is named as your primary, and he or she passes before you or with you, the benefit would then go to your contingent beneficiary. Talk to your insurance agent or lawyer if you want to name any children under 18 to be a beneficiary or contingent beneficiary as special laws apply.
Having a plan in place makes the unknown easier to face. Term life insurance can give you and your loved ones peace of mind about the future.