Term Life Insurance Can be a Life Saver
February 1, 2008
Although no one really likes to talk about it, every day is a gift and we are not guaranteed another. An accident or sudden illness, and our family is left behind to take care of funeral and burial expenses, not to mention the potential financial struggle for years to come. If the unexpected happens, that is when term life insurance can be a life saver.
Unlike whole life insurance, a term policy is for a specific amount of time. You may choose to only have the policy while the kids are growing up, so your spouse has the extra income needed to continue raising the children alone and helping them through college.
Before the policy expires, if you want to extend the policy, you may. The only thing is, the rates are adjustable-although they can never go beyond the cap. So, if you renew the policy, your premiums may be higher or lower, depending on your age and projected expenses, investment earnings, etc.
Generally, term life insurance premiums cost less than whole life insurance. So, many people choose term simply because it is more affordable. After the children are grown and gone, you can let the policy expire.
Alternatively, if you change your mind, and want to make sure your spouse has the money for extra expenses and the rising cost of living, your term life policy can be converted to a whole life policy.
However, if you believe a whole life policy may be your ultimate choice, it is better to purchase the policy when you are younger. With whole life, the premiums are locked in, and cheaper for you now than if you wait until you are older and change your mind.
Actually, it comes down to simple mathematics. If you are on a limited budget, but want a little extra financial security, begin with term life insurance. If your situation improves, you can upgrade to a whole life policy at any time.
Who do you recommend for term life insurance?
If you can afford it, I believe even single people need life insurance. Your friends and family still have to worry about the cost of burial and taking care of settling your financial affairs. But, with the economy, it would definitely be one of the last expenses on my list.
For most people term is the way to go for the majority of their needs. I call them the IF I die needs. You know, if I die before the mortgage is paid, while the kids are in school, before I retire, etc. But other needs are WHEN needs. Those are anything that can complete the sentence WHEN I die I want _____ to happen.
For the WHEN needs I am not a fan of whole life. But there other kinds of life insurance available besides term and whole life. Frankly, I own a LOT of term insurance and a little Universal Life with a no lapse guarantee. The UL acts as a term insurance for the rest of my life since it probably will not have much (if any) cash value.
I am single so there is no need for me to have life insurance.
In terms of whole life insurance – I know that Suze Orman is totally against those. You may agree or disagree with her, but the basic idea – that if you buy a term life insurance and invest the difference in premiums between the term life insurance and whole life insurance, you’ll come out ahead. Something those who consider buying whole life insurance should probably investigate.
We have term life through AAA. I rate shopped and was pleased with their rates, combined with their security rating.
It definitely gives me some peace of mind. Next on the list- get some disability coverage.