Best Term Life Insurance Coverage for Your Needs

Choosing the right term life insurance policy can be overwhelming, but understanding your needs is key.

Most people choose term life insurance to cover final expenses, pay off debts, and provide for dependents.

The average cost of a funeral is around $7,000, which is why many people choose term life insurance to cover these costs.

You may need to consider a 20-year term policy if you have young children who will be financially dependent on you for two decades.

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Term life insurance provides a death benefit for a specified period of time that pays the policyholder's beneficiaries. This period can range from 10 to 30 years, with some carriers offering 35- and 40-year terms.

The death benefit amount can vary widely, often ranging from $50,000 to several million dollars, based on your needs and the insurer's offerings.

A key role in life insurance policies is the policy owner, who is responsible for paying premiums and making any changes to the policy.

The policy owner is also responsible for designating beneficiaries, who will receive the death benefit if the insured passes away during the policy term.

The insured person is the one whose life is covered by the policy, and if they die within the term, the death benefit is paid to the beneficiaries.

You'll select a term length when purchasing a term life policy, which is commonly between 10 and 30 years.

Once the term expires, you can either renew it for another term, convert it to permanent coverage, or allow the term life insurance policy to lapse.

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Choosing the right type of term life insurance can be overwhelming, but understanding your options can help you make an informed decision. There are several types of term life insurance policies, each designed to meet different needs.

Level term life insurance offers fixed premiums and a fixed death benefit for the policy duration, typically ranging from 10 to 30 years. This type provides stability, as both your premium and death benefit remain the same throughout the term.

Decreasing term life insurance is designed to cover debts that decrease over time, such as a mortgage. The death benefit decreases over the term of the policy, making it relatively cheaper compared to level term life insurance.

Here are the major types of term life insurance policies:

Most term life insurance policies are actually level term life insurance, which offers fixed premiums and a fixed death benefit for a set period, usually between 10 to 30 years.

Level term life insurance provides stability, as your premium and death benefit remain the same throughout the term.

Decreasing term life insurance is designed to cover debts that decrease over time, such as a mortgage, and has a lower premium compared to level term life insurance.

Renewable term life insurance allows you to renew your policy without needing a new medical exam, but premiums may increase with each renewal.

Convertible term life insurance lets you convert your term policy into a permanent life insurance policy without needing a new medical exam, usually through a term conversion rider.

Curious to learn more? Check out: Do Term Life Insurance Premiums Increase

Return of premium term life insurance includes a feature where you get back the premiums you paid if you outlive the term of the policy, achieved through a return of premium (ROP) rider.

Here's a breakdown of the major types of term life insurance policies:

Permanent life insurance policies offer a lifetime of coverage and a cash value component that can grow over time. This type of policy can provide a guaranteed death benefit to your loved ones, regardless of when you pass away.

The accumulation of cash value is a key feature of permanent life insurance. This can be used to pay premiums, supplement your retirement income, or even borrow against the policy.

Whole life insurance is a type of permanent policy that provides a guaranteed death benefit and a guaranteed cash value accumulation. It's often more expensive than term life insurance, but offers a guaranteed return on investment.

Worth a look: Permanent Life Insurance Policy

Universal life insurance is another type of permanent policy that combines a death benefit with a savings component. It can be more flexible than whole life insurance, but requires careful management to ensure the cash value grows as intended.

The cost of permanent life insurance is generally higher than term life insurance, due to the accumulation of cash value and the guaranteed death benefit. However, this can be a worthwhile investment for those who value the long-term security and flexibility it provides.

For another approach, see: Do Term Life Insurance Have Cash Value

Term life insurance is a great option for those who want affordable coverage. It guarantees payment of a stated death benefit to the insured's beneficiaries if the insured person dies during the specified term.

The policy has no value other than the guaranteed death benefit and doesn't feature a savings component, unlike permanent life insurance products. This means that if you outlive the term, your beneficiaries won't receive any money.

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Term life premiums are based on a person's age, health, and life expectancy. This is why premiums for people who wait until they are older to apply for insurance will pay higher premiums than if they'd gotten a level-term policy when they were younger.

You can purchase term life policies that last 10, 15, 20 years, or more, and you can usually renew them for an additional term. This makes it a great option for people with growing families who need to maintain coverage until their children reach adulthood and become self-sufficient.

Here are some key features and benefits of term life insurance:

Most policies are a type of level term life; the death benefit and life insurance premiums are guaranteed to stay the same throughout the term. This means that you can count on a predictable cost and a guaranteed death benefit if something happens to you during the term.

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Term life insurance is often the most affordable life insurance option, with premiums ranging from $18 to $67 per month for a $250,000 policy, depending on age and health.

A 30-year-old healthy non-smoking man could get a 30-year term life insurance policy with a $250,000 death benefit for an average of $18 per month.

Most term life insurance policies expire without paying a death benefit, which lowers the insurer's overall risk compared to permanent life policies.

The reduced risk is one factor that allows insurers to charge lower premiums.

Here's a comparison of average monthly costs for a $250,000 term life insurance policy:

Note that whole life insurance premiums are much higher, with a $100,000 policy costing an average of $100 per month for a 30-year-old male.

Unless a term policy is a guaranteed renewable, the company could refuse to renew coverage at the end of a policy's term if the policyholder develops a severe illness.

Permanent insurance provides coverage for life as long as the premiums are paid, regardless of changes in the insured's health.

Term life insurance is the least expensive option, especially if you're young and healthy. This makes it a great choice for those who want to save money on their life insurance premiums.

You only need term life insurance if you have major financial obligations, such as raising children or paying off your mortgage. This type of insurance can replace your income if you die while still having these obligations.

If you think you might want permanent life insurance but can't afford it right now, you may be able to convert your term life policy to permanent coverage at a later date. However, not all policies offer conversion, and the deadline for conversion varies by policy.

To determine how much life insurance you need, consider your marital status, number of dependents, and future education needs. You'll also want to think about your current and anticipated family income, as well as your current assets and debt obligations.

Worth a look: What's the Difference between Term and Permanent Life Insurance

Here are some factors to consider when choosing the right policy:

These are just a few examples of the different types of life insurance policies available. By considering your individual needs and circumstances, you can choose the right policy to provide financial protection for you and your loved ones.

Policy options and features can make a big difference in the coverage and protection you get from your term life insurance policy. A standard term life insurance policy may not cover certain events, but you can add a rider to fill in the gaps.

You can add a child term rider to cover your children, which provides a small payout for all eligible children from as young as 14 days old until they reach a specified age, usually 18 or 25. This rider can be beneficial for families with young children.

Some common riders available for term life insurance include the return of premium rider, which ensures you receive back the money you paid into the policy if you don’t pass within the policy’s term, and the waiver of premium rider, which enables you to pause your monthly premium if you become critically ill, injured or disabled and cannot go to work.

Here are some common riders available for term life insurance:

Yearly Renewable Policy can be a good option for someone who needs temporary insurance.

These policies are one-year policies that can be renewed each year without providing evidence of insurability.

The premiums rise from year to year as the insured person ages, which can make them prohibitively expensive.

They may be a good fit for individuals who only need coverage for a short period of time.

Consider reading: 40 Year Term Life Insurance

Decreasing term policies are a type of insurance that can be used in conjunction with a mortgage.

These policies have a death benefit that declines each year according to a predetermined schedule, which means the payout amount decreases over time.

The policyholder pays a fixed level premium for the duration of the policy, making it a cost-effective option for those who want to match their insurance payout to the declining principal of their home loan.

Decreasing term policies are often used for this very reason, allowing homeowners to ensure they have enough coverage to pay off their mortgage in the event of their passing.

For more insights, see: Decreasing Term Life Insurance Meaning

Riders can be a game-changer when it comes to filling gaps in coverage in a term life insurance policy. A rider, also known as an endorsement, is an optional type of life insurance coverage that can be added to your existing policy.

A child term rider provides a small payout for all eligible children, including adopted and future children, for one flat cost. This coverage can start as early as 14 days old and typically lasts until the child reaches a specified age, usually 18 or 25.

The return of premium rider ensures you receive back the money you paid into the policy if you don’t pass within the policy’s term. If the policyholder passes away before then, the money would be paid to the beneficiaries listed as normal.

A waiver of premium rider allows you to pause your monthly premium if you become critically ill, injured, or disabled and cannot go to work. However, qualifying scenarios are determined by the particular insurer.

For more insights, see: Term Life Insurance Do You Get Money Back

The accelerated death benefit rider allows you to access a portion of your death benefit while you are still alive if you are diagnosed with a terminal illness. This can help cover medical expenses and other costs associated with a terminal illness.

Here are some common riders available for term life insurance:

Convertible policies offer a way to convert a term life policy to a permanent one without going through underwriting or proving insurability.

The conversion rider guarantees the right to convert the policy to a permanent plan, allowing you to choose from any permanent policy the insurance company offers without restrictions.

You can maintain the original health rating of the term policy upon conversion, even if you later develop health issues or become uninsurable.

The premium of the new permanent policy is based on your age at conversion, which means overall premiums will increase significantly.

The advantage of convertible policies is guaranteed approval without a medical exam, so medical conditions that develop during the term life period won't cause premiums to be increased.

However, the company may require limited or full underwriting if you want to add additional riders to the new policy.

Related reading: Can You Convert Term Life Insurance to Whole Life

An annuity is a type of financial product that can be used to help meet financial goals. You can use an annuity as part of your financial planning, and many consumers are now using them for this purpose.

An annuity contract is a type of financial product that provides a steady income stream. You can research more information on annuity contracts by checking with a licensed life insurance agent or a licensed life insurance company.

If one type of annuity contract does not fit your needs, then ask and find out about other available contracts. Many of which are described in this information guide.

You can also visit your public library for material or books on financial planning. Life insurance or annuity information is also available on the Internet.

Worth a look: Life Insurance Contracts

Coverage.com is a licensed insurance producer, and its services are only available in states where it is licensed. This means you can't get coverage through them in all states or scenarios.

Insurance products are governed by the terms in the applicable insurance policy, and all related decisions are the sole responsibility of the underwriting insurer. This is important to note, as it affects how coverage is determined and what you're responsible for.

Coverage.com may not offer insurance coverage in all states or scenarios, so it's essential to check their licensing status before purchasing a policy. This can save you time and frustration in the long run.

Here are some key points to keep in mind: