Life insurance provides you with peace of mind and financial security for your loved ones after you pass away. If you leave behind bills like a mortgage or medical expenses, your life insurance policy can cover these costs and relieve your surviving family of your debts. Life insurance can also replace your income and provide financial support to your family during a difficult period of transition.
When buying life insurance, the first choice facing most customers is whether a term or whole life policy is a better choice. For most people, term life insurance is the better option. It is much more economical, and the extra investments offered by whole life policies are unnecessary for most people. If your primary purpose in buying life insurance is having financial support for your loved ones after your death, a term life insurance policy is the cheapest and most effective way to achieve that goal.
Term life insurance protects you during the agreed-upon term. If you pass away at any time during that term, your beneficiaries will receive the full amount of the policy. If you live past the term, you must purchase another policy. Term life insurance policies have no cash value, and the premiums you pay each month are lost if you do not use the policy before the term ends. Because there is no investment component to a term life policy, the premiums are much lower than a similarly sized whole life policy.
The exact amount of a policy’s premium will depend on a number of factors:
– Your age
– The length of the term
– Your health and habits
– The size of the death benefit
Insurance prices are always highest when the insurer is likely to pay out on the policy. This means that insurance companies will charge more for policies with long terms than short terms. They will also charge more for a policy with a high death benefit than one that would be less costly to pay. Depending on your needs, it may make sense to balance a long term with a lower death benefit or a higher benefit with a shorter term; either would reduce the cost of your premiums.
In general, people who are expected to live past their term will pay the lowest rates for insurance. Individuals with poor health will pay higher premiums. Fortunately, not every insurance company ranks risks in the same way, so a high-risk customer may still be able to find affordable rates from certain companies. Indeed, some insurance companies specialize in providing coverage to high-risk individuals, including the elderly and people with chronic diseases. Comparison shopping between multiple companies will make it easy to find the best match for your needs and budget.