When Term Life Insurance Is a Smart Move

When you’re a young person with limited income, it can be difficult to put your money everywhere you want to put it. In fact, in the modern moment, people of all ages are facing this struggle: living paycheck to paycheck with not much to put away elsewhere.

However, managing the different financial responsibilities of life is just one part of adulthood. Another is planning for the future. Many people don’t like to think of their own mortality so early in life, but it’s amazing what a little proper planning can do.

People could benefit from looking into term life insurance earlier on in life. Term life insurance can be a very smart investment for a wide variety of people.

Why might it be worth looking into this type of life insurance? Read on and we’ll walk you through what you need to know.

What Is Term Life Insurance?

Let’s get started with the basics. What is term life insurance, and what does it have to do with life insurance in general? As you’re likely aware, life insurance is a form of insurance intended to protect the well-being of your loved ones.

When the holder of a life insurance policy passes away, the insurance company pays out a total to the family that they have left behind. In this way, the family can live comfortably for some time after the loss, despite losing potentially the main source of their income.

Term life insurance provides this kind of coverage for a limited window of time. Often, this kind of life insurance is put into place to protect your family if you were to die prematurely. It only covers a specific window of time between your signing of an agreement and the end of the term.

Commonly, a person signing up for term life insurance would retain coverage for ten, twenty, or thirty years, but it all depends on the needs of the individual.

The payout of a term life insurance policy, also known as the death benefit, remains the same throughout the life of this term. However, should you live throughout the window of time and die after the period stated? Your family would get nothing from the insurance company.

This all differs from the other popular type of life insurance: whole life insurance. Whole life insurance is a form of insurance that covers a person’s life from signing until death, with no exceptions. 

Those who get whole life insurance don’t have to worry about aging out of their window of time. However, that doesn’t mean that whole life insurance is right for everyone.

There are many, many reasons to consider term life insurance instead.

Benefits of Term Life Insurance

There are a lot of reasons why someone looking into life insurance might decide that term life insurance is the right choice for themselves and their family. After all, there are many benefits.

If you’re deciding between life insurance plans (or deciding if you want to enroll in coverage at all) it can be extremely helpful to consider all the many benefits of this kind of insurance.

When and why might term life insurance be a smart move?

Protect Your Income

Many people get term life insurance to cover the period of their lives where they are working the most. This is also when the most bills are coming in, for a wide variety of needs from everything from the mortgage to the phone bill.

What would happen if all of the sudden you weren’t around anymore to pay for these various things? We don’t like to think about death or our own absence, but you never know what might happen in life. Plenty of people pass away far too soon and early in life, leaving vulnerable families behind.

You don’t want to make the mistake of thinking that life insurance can wait when really you might need it right around the corner. 

Hopefully not, of course, but it can never hurt to be prepared. The cost of life insurance when you’re young and healthy is often quite low, and you might be able to lock in an amazing price that can last for many years.

People who get term life insurance often get this form of insurance to feel covered during this time of their lives. They might feel as if when they reach a certain age, they will no longer have to worry about the well-being of the family they leave behind.

Perhaps, you only feel as if you need life insurance while your family is expecting a flow of income. If you can make it to retirement, the kids go through college, and so forth, then maybe you don’t have to worry about protecting them late in life.

Handle Expenses

There are a lot of costs that your family might face in your absence that could be covered by term life insurance. Considering all of these expenses might push you over the fence on deciding that now is a good time to have this kind of policy in place.

Are you and your family still paying off various loans and debts? The death benefit from your life insurance policy could be used to pay these off in the event that you are no longer around.

It might sound callous, but most debts are not forgiven at your death and are instead passed on to your family. These might be substantial amounts that can make it hard to live everyday life properly — having a term insurance policy in place can be essential to ensure your family isn’t burdened by these debts in your absence.

There are also the many costs directly associated with your death that your family will have to cover. There are the medical costs from when you were assumedly sick or in the hospital, which as we all know, can be quite expensive in the United States.

There’s also the cost of the disposal of your body, via burial or cremation, and the funeral ceremony costs that the family will need to finance. This is a lot to handle in such a difficult moment, which is why having life insurance in place can be so helpful.

The payout from the insurance company can be used to pay for all of these needs and then your family won’t be in such a difficult situation.

More Affordable Option

If you’re strictly between whole life insurance and term life insurance, why might you go with the latter? For one reason, it will be a lot more affordable.

When you get a whole life insurance policy, the insurance company in question knows that they will eventually be paying out said policy to your family. In order to keep in business and make a profit, the company will need to take the gamble that you’ll live long enough to pay for more than the plan is really worth. 

That means the premiums on a whole life insurance plan are going to be quite high. The company needs to try and make their money back, naturally. However, with a term life insurance policy, there’s a decent chance that there will be no payout needed at all.

This mitigates the risk for the insurance company and allows them to make you an offer for premiums that are much lower per pay period. If you’re concerned about fitting the cost of life insurance into your monthly budget, looking into term life insurance can make things much simpler.

At the end of the day, many people simply cannot afford the high cost of whole life insurance. So term life insurance remains popular for this very reason, and you can find it a whole wealth of different budget levels.

Re-Investing Funds

The cheaper price tag of a term life insurance policy might also open financial opportunities to you that you wouldn’t have if you went with whole insurance. If you’re paying high premiums, you might not be able to invest your money elsewhere.

With the money saved on term life insurance, you’ll be able to put away a much larger amount of cash in more lucrative forms of investment. This should allow you to enjoy increases in your net worth.

You can use these savings to protect and care for your family in the same way you might have with a payout from a whole life insurance policy.

Why Get a Term Life Insurance Policy?

If you’re in the market for life insurance, you may be on the fence on whether or not to get a term life insurance policy. The above information can help clear up the many reasons why getting this kind of policy might be a smart move.

Need more financial advice and information? Keep scrolling our blog for more.

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