Term life insurance can be a great way to protect your family financially if you were to pass away. With its low cost premiums, term life insurance often offers an affordable choice for young families or young professionals with dependents. Here are four things to think about before getting term life insurance.
Think beyond your salary
Many people associate life insurance with breadwinners. They may get coverage to ensure that their dependents can be financially secure should anything happen to them, and choose a coverage amount based on their yearly salary. However, depending on your situation, you may want to get term coverage even if your contribution to the household is not financial. For instance, if you are the only member of the family that cooks, or if you provide full-time care to children or a sick family member, then you’re providing an unpaid but invaluable service to the family. Your family may need to hire a cook or caregiver in your absence. In this case, it may be a good idea to get term life insurance so your family can pay someone to take on these important tasks if you pass away unexpectedly.
Consider your current debt
If you have taken out a large loan, such as a business loan or a mortgage, then term life insurance might be a way to help protect your family in the event of your passing. A term life policy that covers you for your mortgage term may make sense, since it would enable your spouse or family to pay off the mortgage and avoid the stress of selling the house or repaying the mortgage alone. Similarly, if you plan to help pay for your child’s college tuition, it may be a good idea to get coverage through your child’s college years. These kinds of financial obligations may affect your decisions surrounding policy term as well as the coverage you decide to get.
Think of your beneficiary’s needs
When considering a term life policy, it’s important to consider your beneficiary’s needs. This can apply to the term and amount of the policy. For example, new parents who just bought a house might opt for more coverage than a couple that doesn’t plan to have children.
You may be able to convert to permanent life insurance
Remember that with term life insurance, there is no payout if you outlive the policy term. That’s why the premiums tend to be lower than permanent life insurance, which has a guaranteed death benefit, among other features. For young parents and couples, term life often makes sense as they may need coverage for limited periods and benefit greatly from lower premiums. However, as you get older, you may find that you want to leave behind a legacy (even if you don’t strictly have dependents) or want to help provide for caregivers, grandchildren, or other loved ones. In such a case, you can talk to your insurance provider about converting your term insurance to whole life insurance. Some insurance companies provide the option to convert some or all of your coverage into a permanent policy within a specific time period.
