Term life insurance (also known as term assurance) is life insurance that provides coverage at a fixed rate of payments for a set period of time. After that period expires, coverage at the previous rate of premiums is no longer guaranteed. The client must then either forgo coverage or potentially obtain further coverage with different payments and/or coverages. If the life insured dies during the term, the death benefit would be paid to the beneficiary. Term insurance is the most affordable way to purchase a higher death benefit, so it is often recommended to purchase term life insurance before considering purchasing whole or universal life insurance.
Here are some questions to ask to determine if you need term life insurance:
- If you were to die unexpectedly, would your loved ones need money to pay the bills?
- How would they pay for rent, mortgages, food, car notes, your medical and funeral expenses?
Keep in mind that term life insurance does not last forever, so it has no cash value that you can borrow against. However, term life insurance is a relatively inexpensive way to provide the money your family needs when you pass away.
You can add riders to term life plans so that they have more benefits than just a death benefit on the covered person. These riders can extend coverage to spouses, children and sometimes grandchildren. Other riders can guarantee you can renew your policy before it expires and there are even riders that give you back some or all of your premium. Riders usually increase the cost of the policy, so discuss the options with your agent and make sure the cost of adding a rider is worth the benefit you will receive.