You probably have a few dependents right now, but know that one day, as your children grow older and retirement grows nearer, they will no longer be financially dependent on your income.
If this is the case, a term life insurance policy is likely right for you.
When searching for the best term life insurance rates, it is important to remember that depending on your health, age, lifestyle, and coverage needed, there is a broad spectrum of affordable term life insurance policies available on the market that fit your needs.
Table of Contents:
- What is Term Life Insurance
- What Happens to Term Life Insurance at the End of the Term?
- Advantages of Term Life Insurance
- How Much Coverage Do You Need?
- How To Choose a Term Policy?
- Term Policy Riders
- FAQs of Term Life Insurance
- Best Term Life Insurance Companies
What Is Term Life Insurance?
Simply put, term life insurance is coverage with an end date. When you purchase a term life policy, you not only decide on the amount of coverage but how long the coverage will last.
What Happens To Term Life Insurance At The End of The Term?
Common term life insurance policies are anywhere from 5-30 years. Additional riders and add-ons can allow for conversion or extension of the policy into whole life insurance, a type of life insurance that is considered permanent; coverage that lasts until death, with a guaranteed payout.
You are 30 year old male, and you decide to purchase a 30 year term policy for $500,000. If you were to die at any point during between age 30 to age 60, the policy would pay your beneficiaries $500,000.
At the end of the policy term, the coverage will continue as long as you renew and continue to pay the premium. However, the price will increase from the premiums you paid during the “term”.
Essentially, the term doesn’t necessarily lock in coverage for a period of time, it guarantees the cost of the policy for that term.
Without that set term, your premium would increase every policy year because your age continued to increase.
When you purchase a term policy, the longer the term you select the higher the premiums will be because the company is more likely to pay a claim on the policy.
To summarize…term insurance is life insurance with a guaranteed premium for a specific amount of time.
For most customers, term life is the superior product. If a person wisely saves for retirement, they have little need for life insurance as their dependents leave the nest, and their debt decreases.
Their savings become their own self-insurance.
What Are The Advantages Of Term Life Insurance?
Here’s just a few of the advantages of term life insurance:
- Provides only a death benefit
- Pays out if you die while coverage is in effect
- Is the most affordable life insurance product
- Is purchased in “terms” of time such as 5, 10, 20, or 30 years
- Becomes more expensive to purchase as you get older
How Much Term Life Insurance Coverage Do I Need?
You can make this really complicated, analyzing all your assets and liabilities, future earnings, future expenses, etc.
But there is one easy question that helps figure out how much life insurance coverage you need:
How much coverage do your dependents need annually?
Think about house payments and tuition. Those are the big items.
What does your salary contribute today, and what would they need if that salary disappeared?
Once you have fewer dependents, the kids, grow up and begin their own life, and you begin to pay off your mortgage, your need for coverage in the event of your death mainly pertains to your spouse, and final expenses.
Whereas whole life insurance can build a legacy for future generations if you have the wealth to do so.
How Do You Choose A Term Life Policy?
As you begin looking at a variety of term life insurance quotes, there are 5 components you should consider when trying to identify the best term life insurance rates:
- Coverage Amount
- Term Length
- Insurance Company
- Insurance Agent
- Special Features
That sounds like a lot of information to analyze, but we promise…it’s not that complicated.
You will be a confident buyer after you read through each of these components.
Selecting A Term
Determining the length of time you need term life coverage mostly comes down to the how old you are when you purchase coverage.
What is the best age to get life insurance?
Ideally, the younger you buy term life insurance, the better. Any age below 35 is considered to be optimal, and 25 is considered by most life insurance companies to be the best age to purchase term life insurance.
When finding term life insurance for a younger person (20s or 30s) go for longer terms such as 30 yr terms because they are a very low risk of death if they are healthy.
Especially if they have kids who will be dependent throughout most of the term, have mortgages, or other loans.
For someone in their 40s and 50s, the best term life insurance rates may come in the form of 20 year policies, which often cover until age 70 (though there are some providers that insure up to age 95).
Also, something to keep in mind when determining the best term life insurance policy for you is your retirement fund. The more you have saved for retirement, the less coverage and time you need in a term life policy.
Term Life Insurance Policy Riders
Term life policies may not be as complex as permanent policies, but many do have features beyond pure coverage.
These additional features are often called add-ons or policy riders.
Some help extends the term of the policy, others can change rates over time, and some offer additional death benefits and coverage options.
Waiver of Premium Rider
If you become totally disabled your premium is waived completely with the wavier of premium rider. This usually expires at age 60 or 65.
Disability Income Rider
The disability income rider pays a monthly income in the event of your becoming disabled. Some companies only provide if you are disabled by an accident, others offer more comprehensive coverage, like in the event of illness.
Term Conversion Rider
The term conversion rider allows you to convert a term life policy into a whole life policy.
Usually, this option is available to policyholders every 3 years of their policy up until a certain amount of the policy is through. This varies by company.
Accelerated Death Benefit Rider
The accelerated death benefit rider lets you collect a fraction of your life insurance death benefit if you become terminally ill.
Usually, there is a maximum amount you can receive of $250,000 or $500,000.
Child Protection Rider
The child protection rider can provide coverage in the event of the death of a child.
Accidental Death Benefit
If you are killed in an accident, your beneficiaries receive the death benefit of your term life policy, plus an additional accidental death benefit.
Some policies also offer this for dismemberment or impairment as well.
Return of Premium Rider
With the return of premium rider, if you live through the term of your life insurance policy, you will receive back the total amount invested in the policy over the term.
What to Consider When Purchasing A Term Life Insurance Policy:
Purchasing life insurance is an important part of your financial future, so make sure that you are well informed on all aspects of the policy your purchase:
Can the Term Policy Be Converted to a Permanent Policy?
Many term policies can be converted into a permanent policy.
If permanent life fits your financial goals and strategies, this could be a painless way to ease into one. One huge benefit when you convert is the elimination of the medical exam.
Can the Term Life Policy Be Extended?
Most term policies do not technically expire until reach age 95. As long as you renew, coverage will continue, usually at a much higher rate than you were paying during the term.
However, some policies allow you to extend the policy with a new locked-in rate.
Can You Decrease the Death Benefit of Your Term Life Policy?
Perhaps you bought a large amount and during the life of your policy, your circumstance has changed.
The premium is pinching your budget, or the amount of coverage is unnecessary for your situation. Some policies allow you to decrease the death benefit within a defined window.
Best Term Life Insurance Companies
We’ve answered your questions about what is term life insurance and how to choose the best term life policy.
Every one of these companies is financially strong and offers some of the best term life insurance rates.
While choosing the best term life insurance company for you can be hard, you now know what to look for and what questions to ask in order to identify the right coverage for you.
You also have a very good starting point of what the top 10 term life insurance companies are.
From here, what you want to do is speak with a life insurance agent. Discuss your own needs and budget with them. They will present a collection of term life insurance quotes that provide you with the protection you need to protect your loved ones and dependents in the event of your death.
|Company||JD Power||A.M. Best|
|1. New York Life||782||A++|
|2. Mass Mutual||787||A++|
|3. Mutual of Omaha||789||A+|
|4. Voya Financial||781||A+|
|5. Banner Life||N/A||A+|
|6. Pacific Life||808||A+|
|10. Genworth Financial||789||A+|