Term life insurance is an easy to use insurance option, but is term life insurance worth it? This is a common question when you’re shopping around for insurance options.
Term life insurance will provide your family protection after you pass away. They can use the funds to pay for funeral arrangements, living expenses, or to pay off debt.
In comparison to other insurance options, term insurance is one of the most affordable. With term insurance, you only pay for it when you need it. Think of it as a safety net while you’re raising young children. Once your children have grown, you know longer need to renew it.
We’ll dive deeper into the benefits of term life insurance, how it works, and why it is well worth the investment.
1. Term Life Insurance Is Easy to Understand
One of the many benefits of a term life insurance plan is that it is easy to understand and use. While this may not seem that important, if you have an insurance product that is overly complicated, chances are you won’t know how to maximize its benefits.
So how does term life insurance work? The term refers to a set amount of time in which you have life insurance coverage. If your insurance term runs out, you’ll need to get a new policy or renew your current policy before it expires.
Let’s say you take out a $500,000 term life insurance policy. This means that your death benefit is $500,000. Once you pass away, your designated beneficiaries will receive $500,000.
Over the course of your insurance term, you’ll make monthly installment payments to pay for your insurance policy.
2. Works for Those With a Lot of Financial Obligations
One of the best things about a term life insurance policy is that it can help pay a variety of financial obligations. Your beneficiaries can use your policy to pay off a mortgage, pay off debt, or pay for college tuition.
If you have people who are depending on you financially, term life insurance is worth the cost. In the event of an unforeseen passing, you’ll be leaving your loved ones protected.
3. You Can Use It for Almost Anything
Another great perk of term life insurance is that they can be used for almost anything. Let’s say you have a term life insurance policy and you pass away at 85. You have designated your daughter and your grandchildren as your beneficiaries.
Your daughter can then use the death benefit to pay for funeral arrangements, mortgage payments, household bills, or student loans.
If you leave a spouse behind at the age of 40, they’ll be able to use these funds for living expenses and caring for your children. The benefits are paid in a lump sum and they are also typically paid tax-free.
If you’re young and healthy with a family, these policies are essential in the unexpected death of you or your spouse.
Dependents or your beneficiaries can also use the payment to make a charitable donation in your honor or cover the cost of any medical bills.
4. The Beneficiary Can Be Anyone You Choose
Another bonus for using term life insurance is that your beneficiary can be anyone you choose. You can designate a child, spouse, or grandchild but you can also designate someone outside of your family.
Your beneficiary can be a friend, college, business partner or entity.
If you prefer to leave your death benefit to a non-for-profit or a charitable organization, for example, you can do so. Let’s say you have worked with a local pet shelter for a number of years after you pass away, you can give your death benefit to this organization.
If you own a small business with someone, donating your benefit will allow them to stay afloat if you unexpectedly pass away. The flexibility is a huge benefit to term life insurance.
5. Term Life Insurance is Less Expensive
Term life insurance is a lot less expensive when compared to other types of life insurance. The younger you are, the less expensive your life insurance will be.
If you are young and healthy, you’ll only make low monthly payments on your life insurance.
Older adults can also look at these policies as retirement income for the spouse that is left behind. If your husband passes away, you can use the death benefit to live while you’re retired.
In terms of other plans, whole life insurance policy is going to cost more than term. This is because your policy doesn’t run out at a set time. You will pay a premium for longevity.
One of the reasons term insurance is less expensive is because you’re not paying for insurance your entire life.
If you open a policy when you’re 25, for example, you’ll only pay for the policy for 30 years while you have young children who are dependent on you.
Once you’re 55 and an empty nester, you’re no longer paying for insurance you don’t need.
Is Term Life Insurance Worth It?
Is term life insurance worth it? If you have kids and a spouse, term life insurance is completely worth it. For a low monthly cost, you’ll ensure that your loved ones are covered if you pass away.
Without a life insurance policy, if you pass away unexpectedly, your spouse and children will be left with all of your debt, funeral costs, and expenses.
Buying a term life insurance policy will guarantee your family is covered. You can also use a life insurance policy to give your death benefit to someone outside of your family.
You can donate your benefit to a charity or give it to your business partner after you pass away.
To learn more about term life insurance policies, fill out the contact form here to speak with an insurance expert who can help find the best policy for you.