One of the biggest risks any family faces is the unexpected death of a financial provider. If you’re the breadwinner in your family, you may feel like death is an unlikely risk. That could be especially true if you’re relatively young and healthy. Death may not be a likely scenario, but it is possible. If you do pass away, your death could leave your loved ones with debt, a lack of income and other financial challenges.
You can use life insurance to minimize this risk. Unfortunately, many people don’t have life insurance because they feel it’s too expensive. A recent study by InsuranceQuotes found that nearly 40 percent of Americans don’t have life insurance.1
The truth is that a wide range of policies are available to fit every type of budget. Term life insurance, in particular, is usually affordable for most people. If you’re on a tight budget or want to minimize your premiums, term insurance could be the right strategy for you.
What is term insurance?
Term insurance provides protection for a limited period of time, such as 10 or 20 years. The period is set when you purchase the policy. Generally, the longer the period, the higher the premium. Term is often an affordable alternative because its premiums are usually lower than those for permanent insurance.
Term also doesn’t accumulate cash value inside the policy. This is a big difference between term insurance and permanent insurance. In a term policy, all of your premiums go toward the cost of insurance. That helps keep your costs down, but it also means your funds don’t accumulate inside the policy as they would with permanent insurance.
What are your options when the term ends?
The goal is that you never have to use your term policy. In an ideal world, you would still be alive when the term reaches its end. At that time, you may have a few options available. The simplest is to let the policy lapse and stop paying premiums. You wouldn’t get back any of your previous premiums, but you also wouldn’t have to pay any in the future.
You also may be able to renew your policy for a new term. However, your premium will likely be recalculated to reflect your older age. Another possible option is to convert the term policy into a permanent policy. Again, though, you’ll likely have a higher premium based on the fact that the policy is permanent and that you’re older.
Is term insurance right for you?
Term insurance is appropriate when you have a temporary need for protection. The classic example is when you have minor children in the home. Another is when you have a sizable mortgage. You can buy a term policy to stay in force while your children are dependent on you or while you have a mortgage balance.
Term could also be appropriate if you have no coverage and a limited amount you can spend on life insurance. Even if term isn’t exactly right for your needs, it’s better than having no coverage at all. If you can only afford a limited amount of premiums, term could help you get the right amount of protection.
Ready to develop your insurance strategy? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and create a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
17963 – 2018/9/4
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