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It is common for young adults in their early twenties and thirties to put off looking into life insurance. They consider it something that they cannot afford and assume since they are in good health, it is not a priority. However, no matter how healthy someone is, accidents can happen at any time. Without life insurance to help make up missing income, families can quickly find themselves in financial trouble.
The good news is that there is an excellent low cost option for young people just starting out: twenty year term life insurance. Unlike whole life insurance plans, term life covers a preset period of time, which is usually 10, 20 or 30 years. This allows monthly premium payments to be much lower than other life insurance policies, especially if the insured is in good health. The goal of term life insurance is quite simple: it is there to replace lost income.
While this type of life insurance policy is easy to understand and extremely inexpensive, especially compared to other types of insurance, it is not for everyone. As with other kinds of insurance, the cost of monthly premiums is tied to the health of the insured. Therefore, people who are in their 20’s and 30’s are able to benefit from the lowest policy payments. Additionally, term life insurance only offers coverage for a set amount of time, unlike whole life insurance which is permanent and never expires.. The majority of people who chose this type of life insurance intend to be able to self insure after the end of the policy period.
It is important to note that term life insurance is also not a viable option for estate planning or charitable giving, since there is no guarantee of a payout. Further, while it is an excellent option for the majority of families, people who have special needs children may want to consider full life insurance policies. Children with special needs may require funds to ensure that they are taken care of throughout their entire lives, and term life insurance may not be able to provide that.
There are several advantages to choosing term life insurance over other types of insurance. To begin with, it is simple to understand and as mentioned, offers the lowest cost way to provide a high benefit payout to beneficiaries. People are guaranteed the same level premium rate for the duration of the policy, so they do not have to worry about costs increasing over time or due to health issues. Another advantage of using term life insurance is that the payout is income tax free.
Further, while this type of life insurance is set to end when the term has completed, people still have the option of extending their insurance policy on a year by year basis. While people do not have to have another medical exam, their policy premium is based on their age. This is usually a much higher amount than what they were paying for their original policy agreement, but the option is still available. Typically the premiums go up around 50% once the term period expires, however some can be as much as 100% more to convert from 20 year into a permanent policy depending on your age. You can ask your agent to provide you average term life insurance quotes for individuals 20 years older than yourself to get an idea.
When looking into term life insurance, there are two main options that people need to consider: the length of the term and the amount that they are insured for. Most people select term life insurance because they want to be sure that their children will be taken care of financially, should something happen to them. However, after 20 years, children should be able to support themselves, and this type of policy is no longer needed.
The other thing that people should consider when looking at term life insurance is how much they want their payment to their beneficiaries to be. Since the goal is income replacement, choosing a high payout option is not always the best decision, especially since the chosen amount will not be paid out after the term ends. To figure out a realistic payout amount, people should take their yearly income and multiply that number by between 25 or 35. This will take into account for additional income over the years and also ensure that there is more than enough money for a family to live off of without sending monthly premiums through the roof. If you make around $100,000 of annual income per year you would want to purchase a life insurance policy with a face amount of 1 million dollars or more. This will replace your income for about for years.
There are very few people that would not benefit from some form of life insurance, and no one can be sure what will happen to them from one day to the next. While full life insurance policies may be too expensive for many younger people, term life insurance offers people the ability to take care of their families for a low monthly premium. People can easily get a rate quote online to find out how much a term life insurance policy would cost them monthly. These quotes are free, look at pricing from a variety of insurers and only take a few minutes to complete.
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