Get Term Life Insurance: Steps To Protect Your Family

Term life insurance is a contract between a policyholder and an insurance company that promises to pay a death benefit to the beneficiaries named on the policy if the insured person passes away within the time period of the policy. It is generally the cheapest way to buy life insurance and is a good option for those with specific debts to cover, such as a mortgage or a child's college education. When considering a term life insurance policy, it is important to think about the length of the term and the coverage amount. It is also crucial to provide honest and accurate information when applying for term life insurance, as lying on the application can be considered fraud and may result in denial of coverage or benefits.

When to get term life insurance

Term life insurance is a type of insurance that guarantees a death benefit to the insured person's beneficiaries after they die within the time period of the policy. It is generally the cheapest way to buy life insurance and is a good option if you only need the death benefit for a limited number of years.

When it comes to buying term life insurance, younger is usually better. The younger and healthier you are when buying life insurance, the more money you'll save. As you get older, you are at a higher risk of developing health conditions, which can result in higher mortality rates and higher life insurance rates. If you wait too long to purchase life insurance, not only will it be more expensive, but it can also be harder to get the policy approved by an insurance underwriter. Therefore, the best time to buy term life insurance is usually as soon as possible.

However, the right time to buy term life insurance depends on your personal and financial circumstances. If you have a family or are planning on starting one soon, or if you have debt that your estate would be responsible for after your death, you should consider buying term life insurance. You may also want to buy term life insurance if you have unsecured debt, such as credit card balances or private student loans, as your loved ones may be responsible for those loans if you were to pass away.

When choosing the term length of your policy, consider the length of the debt or situation you want to cover. For example, if you want to cover the years until your children are through college, you might pick a 10-year term policy. If you have a 30-year mortgage, you might opt for a 30-year term policy.

In summary, while the best time to buy term life insurance is generally as soon as possible to take advantage of lower premiums, the right time for you will depend on your individual circumstances, including your family situation, financial obligations, and health.

How much term life insurance you need

The amount of term life insurance you need depends on your personal circumstances. A common rule of thumb is to get coverage that is equal to 10–12 times your annual income. This will give your family a financial cushion and the time to grieve if you die. It also means that they could invest the payout into good growth stock mutual funds with a 10–12% return, which could replace your salary for years.

However, there are other factors to consider. You should also take into account any debt you have, future expenses such as college costs for your children, and the future growth of your income and assets. You should also consider how much your living expenses are—if you live frugally, you may be able to get by with a lower amount of coverage.

If you are the sole breadwinner in your family, you should also consider getting a policy for your spouse, especially if they are a stay-at-home parent. You should calculate how much it would cost to pay someone to do all the things they do for your family, such as childcare and household duties, and ensure that they have their own policy for this amount.

You can use an online life insurance calculator to get an estimate of how much coverage you need, or you can calculate it manually by adding up your financial obligations and then subtracting your assets.

Term life insurance is usually cheaper than whole life insurance and is often recommended by financial experts as a better value.

How to apply for term life insurance

Step 1: Calculate your coverage needs

First, consider your financial obligations and goals for the future. Think about your everyday expenses, such as childcare, utility bills, and groceries, as well as long-term costs like college tuition and mortgage payments. Subtract the value of any assets you own, and the resulting figure is the gap that a term life insurance policy can help fill.

Step 2: Consider additional riders

You can customise your term policy with life insurance riders for a fee. These provide additional coverage. For example, an accelerated death benefit rider allows you to access your policy's payout if you become ill, and a waiver of premium rider pauses your premiums if you become disabled or unemployed.

Step 3: Get prices from multiple companies

The cost of coverage varies among companies, so compare life insurance quotes from multiple insurers. Consider the financial strength rating of each company, as this indicates their ability to pay claims in the future.

Step 4: Choose a term length

Consider the length of the debt or situation you want to cover. For example, if you're covering the years until your children graduate from college (around 18 years), you might pick a 20-year term life insurance policy.

Step 5: Fill out the application

When you have a quote you like, you'll fill out an application. The life insurance agent will go over your answers, and you may be asked to sign releases, such as one for your medical records. Be prepared to answer questions about your health, habits, and family history.

Step 6: Take a medical exam

After your application is submitted, you may need to take a medical exam to qualify for coverage or get the best rates. This is often arranged at home and includes height, weight, blood pressure, and blood and urine samples.

Step 7: Wait for approval

It typically takes four to eight weeks for traditionally underwritten policies to be approved and issued. Instant life insurance policies that use accelerated underwriting can go into effect on the same day.

How much term life insurance costs

The cost of term life insurance depends on a variety of factors, including age, gender, health, family medical history, driving record, occupation, lifestyle, and the type of policy chosen. Generally, the younger and healthier you are, the lower your premium will be.

According to eFinancial, a 10-year, $250,000 term life insurance policy typically costs between $24 and $29 per month for a healthy 20 to 40-year-old. The cost increases with age, with a 40-year-old paying around $35 per month for the same policy.

Term life insurance is less expensive than permanent life insurance because it lasts for a set number of years and does not build cash value. A healthy 30-year-old woman can get a $20,000 term life insurance policy for less than $8 per month. For older individuals, a 55-year-old woman can expect to pay around $25.50 per month for the same policy.

The length of the term also affects the cost, with a 10-year term policy being less expensive than a 25-year policy. The amount of insurance coverage will also impact the cost, with a $10,000 death benefit costing less than a $100,000 death benefit.

When determining how much term life insurance you need, consider your financial and family situation. If you are the primary wage earner in your household or have dependents, you may need a higher level of coverage. Additionally, consider any debts or final expenses that you would not want to leave for others to pay in the event of your passing. A common recommendation is to buy at least 10 times your annual income in life insurance coverage.

Other factors that can influence term life insurance rates include your health, tobacco use, risky hobbies or activities, occupation, and financial history. Maintaining a healthy weight, managing medical conditions, avoiding tobacco, and engaging in risky activities less frequently can help lower your premium.

How to choose the best term life insurance

Term life insurance is a contract between a policyholder and an insurance company that says if the insured person passes away within the time period of the policy, the insurer will pay a death benefit to the beneficiaries named on the policy. It is usually the most affordable option when you want life insurance to cover financial obligations that are temporary.

• Calculate how much coverage you need: Consider everything you pay for now and everything you expect to pay for in the future, such as everyday expenses, long-term costs, and any debts you need to pay off. Once you have a number, subtract the value of any assets you own. The final number is the gap a term life insurance policy can help fill.
• Consider additional riders: You can usually customise your term policy with life insurance riders for a fee. These provide additional coverage, such as an accelerated death benefit rider, which lets you access your policy's payout if you get sick, or a waiver of premium rider, which pauses your premiums if you become disabled or unemployed.
• Get prices from multiple companies: The cost of coverage varies among companies, so compare life insurance quotes from multiple insurers. Choose a company with a strong financial strength rating, which indicates its ability to pay claims far into the future.
• Pick a term length: Consider the length of the debt or situation you want to cover. For example, if you're buying term life insurance to cover the years until your children are through college, you might pick a 10-year term policy. If you've taken on a 30-year mortgage, you're likely looking at a 30-year term policy.
• Convert your term life policy to permanent coverage: You may be able to convert your term life policy to a permanent life policy, such as whole life or universal life insurance. This can be useful if you realise you want longer life insurance coverage but don't want to shop for a new policy, especially if your current health would make it difficult.
• Shop around for a new policy: When your initial level term period ends, you can renew the policy, but at a higher rate each year. Get quotes for a new policy before paying the higher renewal rate, as you may find a better deal.

Frequently asked questions