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Term Life Insurance: When and why you might consider it?

Term Life Insurance: When and why you might consider it?

June 15, 2020
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Term life insurance is a type of life insurance that will cover you for a specific length of time. These policies typically range from 10-30 years of coverage depending on your individual needs. At the end of your chosen term, the policy will end and you will no longer have life insurance coverage. In most cases, to obtain a policy you will need to go through a fairly simple medical underwriting process to determine your current health status. The premium is based on the insured’s age, health, and life expectancy. If at some point in the future you decide you no longer need the coverage, you can simply cancel the insurance policy before the term ends with no penalty. 

Situations in which term life insurance can make sense:

  • A young couple who has recently purchased a home might consider a term life insurance policy in the amount of the mortgage to pay off the debt to protect a surviving spouse.
  • If you have young children, you might consider a term life insurance policy to protect your spouse and children from the loss of future income. A good rule of thumb for choosing a death benefit for this purpose is 5-6 times your current income.   
  • If you are in a business with partners and have a buy/sell agreement in place, term life insurance is often a very affordable option to fund this agreement. If a partner passes away unexpectedly, the business would receive the insurance proceeds to provide the necessary funds to purchase the deceased's share of the business.   
  • If you have business debt, you may consider term life insurance to cover your family and/or business partners. A policy can be customized based on the specifics of the debt to be covered. Some lenders will ask that a Life Insurance policy be added with the lender as the beneficiary to ensure they are paid back if something happens unexpectedly. This is referred to as a collateral assignment and our office can help facilitate these needs.