Why Term Life Insurance is a Great Product
You’ve decided that it’s time to buy life insurance. Good for you! Life insurance is the foundation of any solid financial plan. But you must now decide what kind of life insurance coverage will work best for you. Term life insurance is an excellent product that allows the highest amount of coverage per premium dollar. The rates for term life insurance have decreased over time making it more affordable now than ever. When considering your life insurance options, many families need to look no further than term insurance.
Simple Coverage
Term life insurance is a very simple product. It offers coverage that lasts for a predetermined period such as 10, 15, 20, 25 or 30 years. It offers affordable premiums that stay level throughout the policy and you can even add riders to some policies for added benefits if needed. In this post, we will discuss traditional level term coverage. There is also the option of return of premium term life insurance, which returns the entire premium paid into the policy at the end of the term. If you want to know more about return of premium insurance, read our post titled “Is Return of Premium Insurance Worth It?”.
Term Insurance in Action
For most families, term life insurance is the best product because it offers affordable protection when you are most financially vulnerable. When you are young and raising a family, the right amount of affordable coverage is essential. Let’s face it; you have the cost of raising children, saving for their college education, paying off your mortgage, saving for retirement and paying off any other personal debts. During this period, term life insurance will provide essential and affordable protection your family needs if you were to pass away unexpectedly. Now let’s fast forward 25 years. You’ve raised your children and put them through college. They are now self-supporting and are no longer financially dependent on you. You have paid off your home and built a retirement nest egg. Is there really a need for life insurance at this point? If you were to pass away, your children are self-supporting and your surviving spouse would have access to all of the available assets. Since the assets will only have to support one person and not two, the available funds will most likely last a longer period of time.
Term vs Permanent Coverage
You have the choice of term or permanent coverage when choosing life insurance. Permanent products such as universal life or whole life should only be purchased if you have a permanent need for life insurance coverage. Permanent coverage does build cash value on a tax deferred basis, but it can cost 7 to 10 times more than term coverage and can take many years to build any substantial amount of cash value. From a savings standpoint, in most cases you would be better off buying term insurance and investing the difference in a Roth IRA, all else being equal.
The Conversion Option
Your life insurance needs may change over time. You may start out needing only term coverage, but your situation could change down the road and you might need some permanent coverage. Most term policies allow you to convert to permanent coverage without proof of insurability. In fact, you should really only consider a term policy that has a convertibility feature. So if you bought a term policy years ago and received a ‘preferred plus’ health rating, you could convert all or part of that coverage to a permanent policy without going through medical underwriting again. Even if your health has declined, your new premiums will be based on a ‘preferred plus’ rating.
Additional Benefits for Term Coverage
There are many riders available that can be added to a term policy for extra benefits. Some policies even offer excellent benefits to base policies that do not require you to add riders. Some examples of riders that are available include accidental death benefit rider, children’s term rider, chronic illness rider, terminal illness rider and waiver of premium rider, just to name a few. If you would like to know more about how some individual riders work, read our post titled “Important Riders for Life Insurance Policies”. The point is that you can still get thorough coverage from a term policy that doesn’t just benefit you when you die.
Conclusion
Life insurance planning doesn’t have to be complicated. For most families, a simple term policy will be sufficient enough to provide the essential coverage needed at an affordable price. You can also purchase a term policy and add riders to give you more comprehensive coverage if needed. Before you buy life insurance, make sure that you talk to an independent agent who can shop your coverage. If you need term coverage, we can help. We have access to over 40 insurance companies and will use all of our resources to get you the best coverage option available. Please feel free to give us a call at (888) 687-9444 or email us at info@archstoneagency.com if you have any questions.
About Us
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com. You can also visit our website at www.archstoneinsurance.com.
