Term Life Insurance: What You Need to Know

Yes, It’s Awkward, But Here’s What You Should Know About Term Life Insurance

We get it — thinking about your death as a young adult is uncomfortable. But having life insurance will help provide your loved ones with financial protection, and The Policy Shop offers easy and affordable coverage to help.

What is Life Insurance?

If you’re in your 20s or 30s, you might have heard about life insurance but think, “I’m young, I don’t need to worry about this right now.” Or perhaps you think, “I don’t make enough money” or “My partner’s the breadwinner, so they’re the one who needs life insurance, not me.”

Here’s the thing: If you have financial obligations like rent or a mortgage, or you have kids or other family members who depend on you, protecting yourself financially could make a huge difference for your loved ones if something bad were to happen, no matter how old you are or how impressive your salary is. That’s where life insurance comes in.

Understanding Term Life Insurance

The simplest and most affordable type of life insurance to consider when you’re young and in good health is known as term life insurance. Term life insurance is a contract structured to cover you financially for a specific period or “term.” This term could be anywhere from 10 to 40 years and could cover things like your mortgage and replace your income if you were to pass away during that term.

When you sign up for a term life insurance policy, you designate a beneficiary (or multiple beneficiaries) who would be paid out, usually tax-free, upon your death during the term.

Who Can Be a Beneficiary?

Beneficiaries could include your spouse or partner, an adult child, a parent, or a friend. You could also designate a charity you care about as a beneficiary if you wish.

Cost of Term Life Insurance

Yes, you have to pay for term life insurance (through regular payments during the length of your term). But it’s not as expensive as you might think! According to a recent study, more than half of Americans overestimate its cost by as much as three times. Let’s put it this way: your yearly cost may be the same (or maybe even less) than you’d shell out for a fancy dinner.

Factors Influencing Cost

The cost of your coverage depends on a few factors. The first is the length of the term you choose. If you choose a shorter term (like 10 or 15 years), your recurring payments will be lower. The second factor is your medical history. Insurance companies need to consider how likely you are to actually die from health concerns during your term. If you suffer from a chronic condition like high blood pressure or cholesterol, you will likely pay higher premiums. If you are a smoker, you will also likely pay higher premiums.

And the older (and theoretically closer to death) you are, the higher your premiums will be. This is why opting for life insurance when you are young and well makes sense.

Determining Coverage Amount

How do you decide on the level of coverage to get? The general rule of thumb is to multiply your annual, pretax salary by 10. So if you make $80,000 per year, you could consider purchasing around $800,000 worth of term life insurance. You can also use an online life insurance calculator to calculate your need based on a variety of factors like your debts, childcare costs, and personal assets. Just know that the calculator will provide you with a general estimate and there may be additional items to consider based on your individual circumstances.

What Happens When the Term Ends?

When the term you select is over, you can choose to extend it at the same coverage level or change it based on how your financial obligations have shifted. For example, you may have paid off your mortgage or put your kids through college when your term ends, so you might not need as much coverage anymore.

You can also add a rider to your base term life insurance policy to avoid having to continue paying for higher coverage when you no longer need it later in life. Learn more about how riders work and the different types available.

Ready to Explore Your Options?

Now that you’ve had a little term life insurance 101, are you ready to explore your options? Simply go online to The Policy Shop and select “Get Your Free Quote Now.” You’ll then fill out a quick form with some basic information about yourself and your coverage needs. You can also call or email customer service for more personalized help.

Embrace the awkwardness so you can protect your loved ones financially. Learn more about the affordable, accessible term LifeENSURE Term Life insurance policies that The Policy Shop has to offer. Get your free quote now!