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When
should I consider term insurance?
If
you need life insurance for a specific period of time, term
insurance should be considered. It provides insurance
protection from one to 30 years and is generally the least
expensive form of life insurance. If you die during the term
of the policy, your beneficiary will be paid the amount of
money specified in the policy. If you are still alive at the
end of the term, coverage stops unless the policy is
renewed. Unlike permanent insurance, you will not build
equity in the form of cash savings.
Term insurance can be a useful financial tool for:
- Those who need a large amount of life insurance, but
have a limited budget, such as a young couple, with
children.
- Covering debts that will disappear in time, such as a
mortgage or car loan.
- Business owners who want to cover the life of a key
employee for a specific number of years.
Keep in mind that premiums are lowest when you are young and
increase upon renewal as you age. Some term insurance
policies can be renewed when the policy ends, but the
premium will generally increase. Many policies require a
medical examination at renewal to qualify for the lowest
rates. Before deciding on a policy from a specific company,
find out what their requirements are. Also, see if you would
be able to convert the term policy to a permanent policy
later on.
If you think your financial needs will change, you may also
want to look into “convertible” term policies. These
allow you to convert to permanent insurance without a
medical examination in exchange for higher premiums. |
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