Find out the top 5 things term life insurance covers and who should consider purchasing a term life policy.
If the pandemic has prompted you to think about how life insurance could give your family more financial security, you’re not alone. There are several options, but term life insurance can be an excellent place to start if you’re young and healthy.
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This blog will highlight the following top 5 things term life insurance covers:
> Day-to-day bills
> Your mortgage
> Co-signed debts
> Childcare and other dependent expenses
> End-of-life expenses
But first, let’s take a look at term life insurance and who should consider buying a term life policy.
What is term life insurance?
Term life insurance, also known as pure life insurance, guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the term life insurance policy to terminate.
Some term policies also come with a “return of premium” feature. That means that if a death benefit isn’t paid out by the end of the term, you’ll get back all or part of the premiums you paid. However, this is a more expensive option. [National Association of Insurance Commissioners (NAIC)].
Term life insurance is a top choice for people who want to cover typical financial obligations when raising a family. Parents may obtain large amounts of coverage for reasonably low costs. Upon the death of a parent, the significant benefit can replace lost income.
These policies are also well-suited for people who temporarily need specific amounts of life insurance. For example, the policyholder may calculate that by the time the policy expires, their survivor(s) will no longer need extra financial protection or will have accumulated enough liquid assets to self-insure.
Here are the top 5 things term life insurance covers, explained:
- Day-to-day bills. Think about what it costs to run your household, day in and day out. Food, utilities, health insurance, car payments, car insurance, clothes, school supplies, extracurricular activity fees for the kids—the list goes on.
- Your mortgage. For many, an outstanding mortgage is one of their most significant debts. In the event of your untimely death, a term life insurance policy can help provide a means of paying off your mortgage.
- Co-signed debts. Your mortgage is likely your biggest debt, but it may not be your only one. Credit cards, car loans, or personal loans may also be lingering. A life insurance policy could allow co-signers to pay off those debts so they’re no longer carrying the weight of those payments after you’re gone. Additionally, paying off co-signed debts could protect their credit scores from damage caused by late payments or delinquencies if they wouldn’t otherwise be able to cover the debts.
- Childcare and other dependent expenses. Having kids is one of the best reasons to consider life insurance. The lump-sum payout associated with your term policy can be used to help pay for anything from daycare costs to summer camps to college expenses. A life insurance policy can also help pay costs associated with raising a special needs child, such as nursing care or special equipment.
- End-of-life expenses. No one wants to think about the end of their life, but it’s essential to think about how your dependents will provide for themselves should something happen to you. What’s more, most life insurance policies offer an accelerated death benefit rider that allows the policy owner to access a portion of their death benefit before they die if they are diagnosed with a terminal illness. That could help you pay medical or other expenses related to long-term care during a time when you can’t work. *Note: Any funds tapped by the accelerated death benefit rider will reduce the overall death benefit once the policyholder passes away.
There’s more to life than paying bills. Life insurance is one way to help you leave a legacy for your family and make sure their financial future is protected.
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