Get Term Life Insurance: A Simple Guide To Follow

Term life insurance is a type of life insurance that provides a lump sum, known as a death benefit, to a chosen beneficiary if you die within a set period of time. This period of time is typically 10, 15, 20, or 30 years, and is chosen by the policyholder. The benefit can be used by the beneficiary however they choose, and is usually tax-free. Term life insurance is a good option for those who want to give their loved ones financial security if they were to pass away unexpectedly.

How to calculate how much term life insurance you need

There are several ways to calculate how much term life insurance you need. One way is to use a life insurance calculator, which will ask you to input information such as your annual income, the number of income-earning years you want to replace for your beneficiary, your debts, future college costs, funeral needs, savings, and any other life insurance coverage. Based on these factors, the calculator will provide an estimate of the coverage amount you need.

Another way to calculate your term life insurance needs is by manually adding up your financial obligations and subtracting your assets. Here are the steps to follow:

Calculate your financial obligations:

• Multiply your annual salary by the number of years you want to replace that income.
• Include any future needs such as college fees and funeral costs.
• Add up your mortgage balance and any other debts.
• Consider the cost of replacing services provided by a stay-at-home parent, such as childcare.

Subtract your liquid assets:

Deduct your savings, college funds, and current life insurance policies from the total calculated in step 1.

The final number represents the amount of life insurance coverage you need.

It is important to note that the amount of term life insurance you need depends on your individual circumstances, including your age, health, income, debts, and anticipated expenses. It is recommended to consult with a licensed agent or financial planner to ensure that your coverage level fits your specific needs.

How to compare quotes from different providers

Comparing quotes from different providers is an essential step in getting term life insurance. Here's a detailed guide on how to do it:

Assess your needs:

Determine whether you need term or permanent life insurance. Term life insurance is ideal if you only want coverage for a specific period, such as until your children finish college or you pay off your mortgage. On the other hand, permanent life insurance provides coverage for your entire life (usually up to age 95-121) and includes a cash value component. Consider factors like your financial obligations, income replacement, and future expenses to decide on the amount of coverage you need.

Research multiple life insurance providers:

Explore life insurance companies that offer the type of policy you need. Compare providers based on customer satisfaction and financial strength ratings from third-party agencies like J.D. Power and AM Best. This will give you an idea of how stable and reliable the company is and how they interact with their clients.

Compare life insurance options:

Gather quotes from multiple insurers and carefully compare the type of policy, coverage amount, and death benefit offered. Shopping around can help you find the best deal as insurers evaluate risk factors differently, resulting in varied premiums. Consider working with a broker who can shop around on your behalf and provide expert guidance tailored to your specific needs.

Apply for a policy:

After selecting an insurer and deciding on the type of insurance, you can apply through a licensed agent or online. Keep in mind that the application process may require a medical examination, depending on the policy specifics. You will usually have a "free look" period after purchasing the policy, allowing you to review and ensure it meets your expectations.

Understand the different types of policies:

There are two main types of life insurance policies: term life and permanent life. Term life insurance provides temporary coverage and is typically the cheapest option. Permanent life insurance, on the other hand, offers lifelong coverage and accumulates cash value, making it more expensive. Within permanent life insurance, there are several types, including whole life, universal life, and variable life insurance, each with its own features and benefits.

Gather information for the application:

To get life insurance quotes, you will need to provide some basic information, including general health information (weight, height), medical history, family medical history, and medications you are currently taking or have taken in the past.

Compare the same policy details:

When comparing quotes, ensure that you are comparing the same or similar policy details, including the policy type, term length, coverage amount, and riders (additional benefits). This will ensure that you are making an accurate comparison.

How to fill out an application

To fill out an application for term life insurance, you will need to provide the following information:

• Personal data: This includes your zip code or address, citizenship status, social security number, date of birth, gender, height, and weight.
• Financial data: Details such as your outstanding mortgage balance, income, and assets will be required. You may also be asked how many children you have.
• Lifestyle choices: Be prepared to disclose any use of marijuana, tobacco, or other nicotine products within a certain period, such as the past five years. You may also be questioned about participation in risky activities such as skydiving or rock climbing.
• Policy choices: The amount of coverage you desire and the term length that best suits your needs.
• Health history: You will need to disclose any past surgeries and other previous health conditions.
• Family medical history: Details on whether your family has a history of certain conditions, such as cancer, diabetes, heart disease, or high blood pressure, are often required.
• Driving record: Any DUIs or other driving violations must typically be disclosed.
• Credit score: Some companies may inquire about your estimated credit score and may even conduct a hard credit check.
• Occupation: If you work in a high-risk occupation, you will likely pay more for life insurance.
• Current health: Depending on the insurer, you may be required to undergo a medical exam or answer health screening questions, such as providing a list of your current medications.

The application process may vary slightly depending on the insurance company, and some may offer online applications. It is essential to compare quotes and research multiple reputable providers before making a decision.

How to add riders to your policy

Riders are additional features or benefits you can add to your term life insurance policy. They are a great way to customise your policy and ensure you have the right coverage for your circumstances.

There are several different types of riders available, and you can choose the ones that best suit your needs. For example, an accelerated death benefit rider allows your policy to be paid out earlier if you have a terminal illness. A children's rider is designed for parents who want to provide life insurance for their children, up to a certain age. Another example is a waiver of premium rider, which protects you if you become disabled and can't pay for your policy.

When considering adding riders to your policy, it's important to evaluate your needs and budget. Decide which options are most important to you and whether your budget allows for the additional cost. Riders can provide valuable peace of mind, knowing that you have extra coverage in place if you need it.

It's worth noting that riders typically can only be added at the start of your life insurance policy during the application process. Therefore, it's essential to carefully consider your options before finalising your policy. Speak to a licensed professional to understand your choices and customise your coverage.

How to renew or convert your policy

If you're approaching the end of your term life insurance policy, you may be considering a whole life insurance policy that provides long-term coverage. The good news is that some term life insurance policies can be converted to whole life insurance before the end of the policy term. This means you might not have to start the search for a new policy from scratch.

Firstly, check your policy documents to see if your term life insurance policy can be converted to whole life insurance. Some policies come with a built-in conversion provision, while others require you to purchase a rider to make them convertible. If you're unsure, contact your life insurance provider to review disclosures regarding the conversion rider.

If conversion is an option on your policy, a term conversion rider will be included in the policy documents. The policy documents will also specify the conversion period, or time frame in which you can make the switch, so be sure to familiarise yourself with the deadlines outlined in your policy.

If you decide to go ahead with the conversion, you'll need to:

• Determine whether your term policy includes the option to convert and whether you are still ahead of your policy's stated conversion deadline.
• Talk to your insurance company about what types of permanent life insurance are available and the conversion cost.
• Fill out a life insurance conversion application.
• Choose the amount of life insurance you'd like in the conversion.
• Choose how you'd like to be billed for premiums (annually, quarterly, or monthly).
• Enter bank account information if you're setting up automatic withdrawals.
• Assign beneficiaries.
• Sign and submit the application.

It's important to note that converting your term policy to a whole life policy will result in higher premiums. You may also be limited in the types of policies you can convert to, and there may be additional pros and cons to consider, depending on your individual circumstances.

Frequently asked questions