No matter what type of life insurance policy you choose, your goal is to make sure that your loved ones will be able to anticipate unforeseen expenses and live comfortably without the income you currently provide. Also known as level premium insurance, term life insurance provides a fixed death benefit to your beneficiaries in the event you pass away within the term of the policy. If the term expires, you receive no money in return for the premium you paid during the term, which can be maximum thirty years.
Of all the life insurance policies, term life insurance makes financial sense if you’re looking for financial protection during a specified term at the lowest premium. Whether you’re looking for a 30-year term policy while paying off your mortgage, for a 20-year term policy to fund your child’s education or for a 10-year term policy to cover for your expenses until you hit retirement, term life insurance can offer you the peace of mind that comes with the certainty that your dependents won’t be left with nothing if you pass away. In the event you pass away within the term, your dependents will receive immediate death benefit as described in your contract.
Unlike other investment products, term life insurance does not build any cash value that the policyholder can recapture or borrow against, but it is purchased to cover short-term needs. But, term policies offer additional benefits including coverage against huge medical bills, coverage of hospitalization and treatment, lower medical costs, lower costs to specialized doctors and better access to routine medical checkups and health care.
One big dilemma that most people face when it comes to term life insurance is when is the right time to buy a term policy. Here are some basic guidelines for considering term life insurance in your 30s.
1. The rule of age
The younger you are, the better financial decisions you make. In your 30s you have less financial obligations and more time ahead to allocate your money properly. In your 60s you have family, mortgages, school loans and medical bills. By purchasing term life insurance in your 30s, you are able to anticipate unforeseen expenses and secure the financial future of your dependents. Moreover, over the term of your policy you will be able to lower your premium as you will have gathered liquid assets to draw money from to cover for unforeseen expenses. Also, in general, the younger you are, the lower the premium. So, why not taking advantage of that as well?
2. The rule of how much
Typically, choosing a term life insurance policy is a decision based on your current budget and individual lifestyle. For instance, if you are a single parent with a child, age six, and you want to anticipate college expenses, you may decide to buy a 20-year term policy. If college expenses would cost you £60,000 per year, a death benefit of £240,000 is adequate to fund your child’s college education in case you pass away within the 20 years. On the other hand, if you are in your 50s, you may consider a 10-year term policy to cover for the years left to retirement and a death benefit for your spouse.
In general, two important factors that need to be taken into account when considering term insurance is protection and cost. Once the term expires, the policy is no longer in force. This means that your beneficiaries will collect the death benefit only if you pass away within the term. Otherwise, the premiums have been paid in vain. The cost of a term insurance policy is the lowest compared to other insurance policies, but you should always have in mind that the premium is a product of age, health condition, and length of term. This justifies why the earlier you buy term life insurance, the better.
Thomas Sterlin is an independent author, whose review articles aim to help consumers make an educated choice of an insurance plan. Read his latest overviews of Bright Grey life insurance and Friends Life insurance products.