Buying any type of life insurance can be a grueling process. Not only are you forced to think about the future, but you know you are going to be spending money. For some people, this is a "double whammy" that is sure to drag them down for a few days (or longer).
Term life insurance is a common option that you will likely consider as you embark on your journey to purchase the best policy. However, before you purchase this type of policy you need to answer the following questions:
Is term life insurance really the right choice for me?
Some people answer "yes" for one main reason: this type of policy is typically cheaper than other options, such as permanent life insurance.
While saving money may be important to you, don't let this be the only thing you consider along the way. Compare the pros and cons of term life insurance to your other options, with one eye on cost and the other on coverage.
- Cheaper when compared to the alternatives
- A variety of terms, allowing you to customize a policy that fits your lifestyle
- Coverage available from a few thousand dollars to millions
- Term life insurance only lasts for the term of the policy, then it expires
- Upon expiration, if you still need insurance you will be older – meaning your rate will be higher
Which agent and life insurance company has the most to offer?
In today's day and age, this can be both a difficult and simple question to answer.
Let me explain: it is difficult to choose an agent and company because of all the options, especially if you live in a big city. On the other hand, with the ability to use the internet you can easily find the agent that is right for you. Best yet, you may never have to leave home to do so.
If you are ready to start shopping, here are three options for doing so:
- Visit each insurance company's website for a free quote. Some of the best include: MetLife, AIG Direct, and FidelityLife.
- Use a third party service, such as IntelliQuote, that provides multiple quotes from one application.
Does the term fit your situation?
When buying term life insurance, you need to decide which term length best fits your situation right now while also thinking about the future.
For example, if you are 30 years old you may want to opt for a term of 20 + years to ensure that it extends close to retirement. This goes a long way in ensuring that you will have coverage while your children, if you have any, are growing.
What if I don't die?
When purchasing term life insurance, you are hoping your family never has to collect the death benefit.
If you don't pass on while your policy is active, you have a few options as your policy comes to an end:
- Let it drop if you don't need coverage any longer
- Purchase a new policy (doesn't have to be term life)
- Upgrade the policy, if you have a conversion clause that allows you to do so
Can I convert my term life insurance policy when it expires?
There is no easy answer to this question. This is something you need to check on when buying the policy, ensuring that you know what to do when the expiration date finally rolls around.
If you have the ability to convert from a term policy to whole life, make sure you are aware of any limitations. For example, you may not be able to take advantage once you reach a particular age.
In most cases, you will be converting your term coverage to one of these three types:
- Whole life – provides coverage until the day you pass on
- Universal life – type of whole life insurance based on a cash value
- Variable universal life – a policy that gains cash value which can then be invested in a variety of ways
The question remains: are you among this group or do you need to purchase coverage in the near future?
If term life insurance is on your mind, answer the questions above before you do anything else.