Term life insurance policies offer insurance customers the coverage they need only during the years that they need it. Because term life insurance policies do not guarantee coverage for life, but for a little slice out of the life of the insured, they are generally priced affordably. In addition, term life policyholders are paying only the cost of insurance with their premiums, rather than paying an additional amount to help cash values accrue.
One of the most challenging aspects of buying a
term life insurance policy is determining what term is right for you. Here are a few questions that you can ask yourself to help decide what policy term to buy.
1. When do you expect your debt to be paid off? Life insurance death benefit proceeds are often used by heirs to pay off the debt left behind when a household wage earner dies. If you expect your debt to be paid off in the next ten to fifteen years then you can choose a term that just covers you for that length of time.
2. How old are your children? Life insurance death benefit proceeds are often used to help give children a head start in life. They can be used to help your children pay for a wedding, adjust to the addition of a child in their own family, and buy their own home. But these head starts might not be as vital to you as making sure your young children have adequate resources for college tuition, the ability to seek counseling if dealing with your death as youngsters, and access to medical and other services for any special needs. The age of your children, and their respective needs for the next few years, can help you narrow down an appropriate term.
3. What are the special needs of your spouse? Not every family has two wage earners. When you have young children, you may have one spouse who stays home to raise the children; this can make the death of the wage earning spouse especially devastating. Additionally, if a non wage earning spouse passes, then the working spouse must hire someone to take care of the kids and household duties that they don’t have time to do. These special needs may only be temporary, but they should be considered when buying term life insurance.
Remember, the term of your policy is meant to help you focus your coverage on your most important and vulnerable financial years. You don’t have to use the above guidelines as your only rules of thumb for choosing the term; you can use anything that makes sense to you.
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