Thursday, September 4, 2008

The Basics Of Term Life Insurance

Or, would it be more likely that you or your spouse?s loss would financially devastate your family? If you stop and think about all the time, effort and energy you have put into creating your family?s assets and your family itself, can you say that you have accumulated enough financial resources that your family would be secure upon your death or the death of your spouse?

Generally, term life insurance policy could also enable your spouse to pay off any of your existing credit card or other miscellaneous debts as all of those are passed down to your survivors.

Additionally, if you have children or if your spouse does not work, term life insurance can protect your family 's finances by providing money for college and living expenses if you die before your children are fully-grown. Your survivors can maintain their lifestyle, as they currently know it. To be sure, buying term life insurance gives your family peace of mind knowing they would be financially protected should the unthinkable occur.

Figuring out the Length of Term You Should Purchase

When determining what kind of term life policy you should buy, ask yourself the following questions:

1. What is your income? The rule of thumb is to buy 10 times your annual salary.

2. What are your short-term debts? Credit cards, car payments?

3. What are your long-term debts or financial obligations? For example, do you need money for future college educations?

4. What is the remainder of your mortgage?

The answers to these questions will help you determine how long a term to buy. Whether you buy a 10, 20, or 30-year policy is determined by your total debts, financial needs, and the needs of your dependents. If your children are almost financially independent, then you can purchase a shorter term -- unless, of course, your spouse might need more financial support or if there are other relatives who depend on you for money. You can also buy term life insurance that covers you until you reach a certain age, usually 65 or 70. Just keep in mind that term life insurance policies expire at a set time and premiums usually increase upon renewal.

Review Annually

It is important to review your policies annually. Many aspects of our lives change thus affecting what kind of insurance we may need. Life changing events occur that would definitely change what kind of term life coverage we may need. Perhaps a birth of a new child may prompt you to increase your term coverage from 20 to 30 years. Perhaps a divorce will prompt you to scale back on your coverage.

Do you want to leave money to charity or any heirs? Did you start a new business in the past year that would need to be protected financially upon your death? Aside from life changing events, you may also review your policy for any other financial protection you may need.

You want to maintain proper coverage without wasting money on too much policy for your family?s needs. All of these things should be considered each year, as our lives are never consistent.


hadley September 5, 2008 at 6:46 AM  

When choosing a life insurance policy make sure you consider: how much life insurance you need, what you can afford to pay, how long you need coverage, and consider the financial strength rating of the insurer.

Permanent life costs 2-3 times more than term life, so if you're on a budget, consider term life insurance.

Make sure you compare term life insurance quotes from several insurers, since rates vary by up to 50% or more between companies.

Learn how term life insurance works to see if it's right for you.

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