Life can be unpredictable, so it’s never a good idea to leave your loved ones without financial security after you die. That’s why you should consider purchasing term life insurance before the worst happens.
While it won’t replace your income during your lifetime, it can provide a safety net for your family in case something unexpected happens. In this article, we’ll explain how term life insurance works and three reasons why it could be the policy for you.
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What Is Term Life Insurance?
Term life insurance is a type of life insurance policy that provides coverage for a fixed period of time – typically between 5 to 30 years. These policies are often recommended for people looking to protect their family against financial hardship in the event of their death.
Term life policies pay out cash lump sum, so long as you die within the policy term. If not, the policy expires, and you won’t be entitled to a payout when you die. Furthermore, you won’t be able to claim a return on the premiums paid throughout the term.
If you’re looking to save money on premiums, it’s best to take out cover at an early stage. At this point, premiums are typically lower, as you’re less likely to develop medical conditions or suffer from heart attacks and strokes, which are more likely to occur when you’re older.
If you’re looking for something simple to protect your family, term insurance could be just what you’re looking for. However, it’s important to understand how these policies work before making a decision.
Types of term life insurance cover
There are three main types of term life insurance – decreasing, level and increasing, each with different benefits:
- Level term cover – Pays out a cash lump sum when you die. The value of the payout, along with the costs of your monthly premium, remain fixed throughout the policy term.
- Decreasing term cover – Specifically designed to cover large payments, like a mortgage, that your family would struggle to pay off without your support. The policy payout is set up alongside your outstanding mortgage balance. Over time, the payout value decreases as you make repayments.
- Increasing term cover – The payout is protected from inflation, so that your beneficiaries receive the same value for money when you die. To do so, the payout value is increased over time. However, your premiums may also increase as a result.
If you’re unsure about buying a term life policy, here are 3 reasons to take out cover…
1. Affordable premiums
The cost of a term life insurance policy depends on the duration of the plan and the payout amount, along with other factors such as your age, health and family medical history.
Term life insurance is generally cheaper than permanent types of life insurance, such as whole life insurance. Whole life policies often have higher rates because they cover you for a longer period of time.
The key difference between whole of life and term insurance is that whole of life covers a policyholder for the rest of their life. Term life insurance, on the other hand, stops once the policy reaches the end of the term.
2. Protects your family from financial risk
Life insurance is a great way to provide financial protection for your family going into the future. If you die prematurely, your death may leave your family without the necessary finances to cover their monthly expenses. The pay out from a term life policy can help your family with future costs, such as:
- Living expenses
- Rent or mortgage payments
- Childcare support
- Utilities
- Medical bills
- Funeral expenses
- Paying off outstanding debts
- Saving money for retirement
3. Flexibility
Although you need life insurance cover now, that might not be the case in later life. Term life insurance lets you decide how long your policy lasts and the amount of money paid out to your loved ones after your death.
With other types of cover, such as whole life insurance, you can’t choose how long the policy lasts. So if you no longer need the policy, you will either have to continue paying premiums, or cancel your policy – which comes with a hefty penalty.
You may also decide whether the policy pays out monthly, or as a one-time lump sum payment. It can also be ideal for covering specific payments, such as a mortgage. When you take out the policy, you are able to choose a policy term that runs until your loan is fully repaid.
Why do I need life insurance cover?
Life insurance is a must-have for any individual. Whether you have children or no children, you should always have life insurance. Why? Because life insurance protects your family financially in case something happens to you.
Let’s say you die unexpectedly. The proceeds from your life insurance go directly to your beneficiaries. Your family would then use the funds to pay off debts, mortgages, college tuition, funeral expenses, etc. Without life insurance, your family could be left to struggle to cover finances.
As the old saying goes: ‘it’s better to be safe than sorry’. In this case, it’s better to have life cover in place than to put your family at financial risk if you died unexpectedly.
Thankfully, applying for life insurance can be done in just a few clicks of a button. Not only that, you can compare quotes from leading providers in an instance. Head online today for a quote.
