Understanding Term Life Insurance

Term life insurance is a great way to set your mind at ease that your loved ones will be taken care of and have guaranteed protection if you pass away. State Farm’s recent polling indicates that only 4 in 10 Americans buy life insurance after big life events, like creating a family and buying a home, to cover their dependents’ payments in the event of their unexpected passing. Term life is, by design, more affordable that whole life policies because of the differing nature of the two products. However, many don’t understand the distinction. For those with dependents, life insurance is a necessary part of the conscientious financial life. We’ll better explain the facets of term life insurance below.

So what is the difference between term and whole/permanent life insurance? With term life insurance, you will select a certain number of years to hold your policy, to be in place over the course of your life expectancy or any other period of time that you choose. Whole life insurance is part insurance, part investment. To fund the investment portion of whole life insurance, the insured will pay sometimes thousands of dollars a year. The monthly payment for term insurance usually totals only hundreds annually.

Think of whole life insurance as a business investment, and because it is an investment, you will be required to put forward much more money than with term. It is sound investment advice to have both investments and insurance, but it is often profitable for the two to be separate and distinct. Wisely chosen investment sources can have higher levels of returns than a more conservative investment package offered by an insurer. However, permanent life insurance may offer real benefit to your individual portfolio. To learn more, contact your insurer or trusted tax professional.

Term life insurance can be adjusted to meet your specific needs. If you want to ensure that your spouse isn’t saddled with your home mortgage in the event of your sudden death, a term insurance policy can be drafted to expire after the loan is scheduled to be fully paid off. A similar plan could expire after your children are old enough to have completed their education. Many term life insurance policies will allow you to add additional coverage to a current policy if you choose.

Whatever you choose, you should always buy enough life insurance to cover the specific needs abundantly. The last thing you want is for your dependents to have insufficient resources after your death when only a few more dollars monthly would have significantly increased their coverage. Also, take care in selecting the length of your policy. Strategic term life insurance can give you and your loved ones real peace of mind.

It is important to note that the information you provide to your insurance company should always be accurate. While information about your health and sky diving obsession may increase your payments, falsifying such information could nullify aspects of your policy.

Disclosure: This blog post was written as part of a sponsored program for State Farm to raise awareness about the importance of life insurance. All views expressed are entirely my own, and were not influenced or directed by State Farm. You can learn more about this blogger program and life insurance at GoodNeighbors.com, PlantingMoneySeeds.com, and by following #StartLiving on Twitter.

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