How does term life insurance work?
Term life insurance is pretty simple. You choose how much coverage you want, and how long you want the coverage for (known as the term). If the insured passes away during the chosen term, the beneficiaries will receive the death benefit.
During the term, the cost (known as the premium) will never increase and the term will never decrease.
Furthermore, the policy will never be canceled, even if your health changes or you develop serious health conditions. The only time the insurer will cancel your policy is if you miss payments.
Coverage wise, a simple calculation is to multiply your annual income times 15. For example, if you make $50,000 a year, $750,000 of coverage is a good rule of thumb.
But, you shouldn’t have to struggle to make life insurance policy payments. We firmly believe that a $50,000 policy you can easily afford is better than a $750,000 policy that may lapse because you missed payments. So, be sure to compare rates for multiple coverage amounts. Make sure you can afford the policy you get.
Choosing the policy term
The policy term is the duration of how long the contract between you and the insurer will last. Most insurance companies offer 5, 10, 15, 20, 25, and 30-year policies. Some even offer 40-year policies.
The maximum term period that will be available to you depends on your age. Most likely, you won’t be able to get coverage beyond age 90 with a term policy.
Keep in mind that you can always cancel your term life insurance policy if you no longer need it.
We believe that it’s better to opt for a 20-year term to be on the safe side. While it costs slightly more than a 10-year term policy, you will save a lot of money compared to getting a 10-year term, and then getting another 10-year term policy once the first policy ends.
Medically underwritten term life insurance policies offer the best price. But as the name indicates, they require a medical exam.
The medical exam is scheduled with a licensed physician near you. If you are unable to visit a physician, it can be arranged for the physician to meet you at your home or office.
This also shows that the medical exam isn’t as bad as you may think. The physician will take your vitals, such as blood pressure and oxygen levels. They will also draw blood for a more in-depth review.
If you are afraid of needles or don’t want to undergo the medical examination for other reasons, you can opt for a no medical exam term life insurance policy instead.
Don’t miss payments
We previously mentioned it’s better to go with a $50,000 policy that you can afford, than a $750,000 you struggle to pay. While some insurers may be more forgiving than others, if you miss payments, the insurer will cancel the policy.