Getting life insurance coverage is smart for anyone who wants to look out for their loved ones and ensure that they will be okay even when they are no longer alive. Term life insurance is the best option if you want to take out a life insurance coverage that will not be a full-time commitment.
There are numerous reasons why you may decide to choose to go for term life instead of permanent life insurance. For example, you might be at a stage where you have a young family with small kids, and you want to make sure that you protect them financially in case anything happens to you before your kids grow up. Let’s take a deeper look at term life insurance and what it is all about.
What is term life insurance, and how does it work?
Term life insurance is a life insurance option that guarantees a payout in case the insured person dies, but only if they die before the term upon expires. This is why it is described as ‘term’ insurance because the applicant picks a duration for which they pay life insurance premiums.
Individuals that take out a term life insurance coverage can decide the duration they want their coverage to last. The length of the insurance coverage may depend on the applicant’s preferences or even their financial capability. If your income is on the higher side, you might be willing to take out a longer coverage. However, if it is on the lower side, you will likely limit the duration so that you do not end up paying too much. Many factors will influence an individual’s insurance rate, such as their health, the level of risk in their occupation, and even how they spend their leisure time.
The basic premise behind term life insurance coverage is that you insure your life for a specified duration. If you happen to pass away during the specified duration, then the beneficiaries listed in your insurance policy will receive a payout. This payout is usually meant to provide a soft landing for the beneficiaries so that they will not end up suffering financial hardships in your absence.
By this definition, you may have guessed that most people who apply life insurance coverage are the breadwinners in their households. The funds that your beneficiaries receive might come in handy when settling funeral expenses or paying off a mortgage, among other uses. Term life insurance is overall cheaper than whole life insurance because oftentimes the policy expires before death occurs. This is because term life has a lower risk profile than whole life insurance.
Do I need term life insurance for 30 years?
Insurance companies allow their term life insurance customers to customize their premiums. For example, some customers may select 10 or 20 years as the lifespan of their life insurance policy. However, many people opt for 30 years and for good reasons.
Three decades is enough time to go through an entire career. Most people have a stable career by the time they turn 30, and thus they start having children at around this age. When you start having children, you start thinking of how you can ensure that they have a good life and good financial backing in case anything happens to you.
You also expect your children to have grown up and started their careers by the time the 30-year duration expires. By then, they can fend for themselves, so you will not have to worry so much. This is why a 30-year term life insurance policy makes so much sense.
Going for the 30-year term life insurance policy also has some added advantages, such as being able to secure affordable rates at the beginning. Based on the above, term life is ideal for young parents because it helps them to add a layer of financial protection to their families. It is also ideal for that particular demography because it is more affordable than whole life insurance coverage.
A 30-year-term life insurance coverage is also ideal for individuals that work in a high-risk sector. Note that a higher risk profile will increase your insurance rate, but it is still good to take out term life coverage to protect your loved ones. If you are looking for avenues through which you can ensure your family’s financial security in case of your absence, then life insurance is one of the best options that you can take.
Term life with no exam
Most, if not all, insurance companies traditionally require any person applying for life insurance coverage to go through a medical exam. There is a good reason for this. Insurance companies try to reduce the chances of payouts as much as possible, which means that it is a probabilities game. If you happen to have a disease that can possibly kill you, then you are considered a high-risk subject, and if you are in great condition healthwise, then you are a low-risk subject. This directly affects the premium rates you will pay.
The healthy person receives lower premiums than the person that has an underlying medical condition. However, things are gradually changing, and you might not have to take a medical exam when applying for term life insurance coverage. However, this may vary depending on the insurer since some still enforce the medical exam requirement.
Some insurance companies may provide term life insurance and other types of life insurance coverage without requiring your medical report as a strategy to attract more customers. It also makes it easier to apply for an insurance premium online, which encourages more people to do so, especially those that have busy schedules. This option is particularly suitable for people that work in the transport segment, such as pilots and truckers who have very little time to visit physical offices for such applications.
This does not, however, mean that your medical data is not important. An insurance company may still obtain your medical history data from third-party sources. The data does not just involve your health record but also key data such as your weight and your height. These two can be used to determine your body mass index, which is one of the commonly used indicators to determine how healthy you are. This data is vital for the underwriting process through which insurance companies usually classify applicants into different categories that indicate your health profile.
The categories determine insurance rates. For example, healthier individuals pay lower rates, and individuals in the less-healthy categories pay higher rates. Removing the medical exam requirement is not just good for the customers but also for the company. It encourages more people to apply for life insurance, and it also helps the companies slash costs associated with the medical exam processes.
Term life vs. permanent life insurance
There are numerous differences between term life and permanent life insurance policies. The main difference is in their names.
Term life insurance coverage is where an individual applies for life insurance for a specified duration of time. Just like its name suggests, permanent life insurance is a permanent insurance scheme that does not have an expiry.
· You will pay the insurance premiums until the agreed-upon insurance coverage duration expires. Once it expires, you can decide to extend the coverage or to terminate it completely. Note that if you do decide to renew your term life coverage, you will end up paying more. However, your insurer may refuse to renew your coverage based on various factors, such as if you developed a life-threatening illness. Meanwhile, permanent life insurance means you will continue to pay the insurance premiums for as long you are alive; thus, there is no opting out if you want there to be a payout when you die.
· Term life insurance tends to be lower priced because it has a shorter life span and for the simple fact that most people outlive their term life insurance coverage. The cost of the premiums for term life will increase depending on various factors. For example, older individuals tend to pay higher premiums than their younger counterparts. Permanent life insurance is more expensive because there is a payout at the end of one’s life. It is also usually bundled with other features that make it more expensive.
· Term life insurance does not have any cash value benefits, which means that the money you put in you pay for premiums does not earn you any interest. You also do not expect to get any money back unless you have a return-of-premium type of coverage, which means that you will get back the money you paid. However, you will not get any interest. Some permanent life insurance policies usually have a cash value, which means they can be used as investment vehicles. This means you can earn interest from your permanent life insurance, and that interest might even be enough to cover some insurance premium payments.
How to get a 30-year term life insurance coverage
The first thing you should do is determine whether a 30-year term life insurance coverage is ideal for you. For example, if you are single and do not have anyone depending on you, then perhaps not so much. However, if you have a family and you are the breadwinner, then it might be a good idea to go for one.
If you feel that it is a good idea to go for term life, then the next step will understand how it works. The insurance premium is the amount you will pay every month, sometimes aggregated into a single annual payment or quarterly payments. Note that the premium you will be required to pay will depend on various factors such as your age and your health. You should also make sure that the amount you pay every month is an amount you can comfortably pay.
Your insurer will quote a sum assured, which is the money that they will payout in the event of your death before the expiry of the 30 years. The sum assured is thus the amount that your beneficiary will receive in case of your demise before the term-life duration expires. Below is a chart showing how an average of how much you will need to pay in insurance premiums if you target specific sum assured amounts and how age and gender may influence the premium amounts.
Once you have a good understanding of what you want from a term life insurance coverage, the next logical step should be to shop around for insurance companies that will likely match your expectations. Fortunately, many insurance companies provide online quotes because that is the easiest way to provide information to the masses. It also increases their chances of getting more customers.
Comparing different providers will also allow you to identify the one that will likely provide value for your money. You can even go for the option that allows you to pay a low premium amount that fits your preferences. However, you also need to exercise caution when picking the insurance company from which to purchase the 30-year term life insurance coverage. Some insurance companies have a bad reputation for failing to provide payouts.
You need to ensure that the insurance firm you select will provide the payout to your beneficiaries in case of your absence. This is why you should do some due diligence to ensure that your chosen company will fulfill their end of the bargain and do right by your loved ones in case of your demise.
Taking out a 30-year term life insurance makes a lot of sense for particular demography, especially those that are building their careers and want to ensure their families are protected worst-case scenarios. The good thing is that this coverage can be relatively inexpensive, and many people can afford it. It is a good idea to take out one, especially if you have a young family, and you want them to be taken care of financially in case of an untimely death on your part.