Owning life insurance has nothing to do with believing in a product.
It has to do with loving someone.
If you love someone enough, then you may consider carrying life insurance to financially protect them in your absence.

What is Life Insurance? How Does Life Insurance work?

Life insurance is a legal contract between a policy holder and an insurance company. The agreement stipulates that the insurance company will pay a sum of money (aka benefits) to a designated beneficiary upon the policy holder’s death.

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Types of Life Insurance

It’s important to understand the three types of life insurance

1. Term Life Insurance: This insurance provides protection for a specific timeframe, for instance, 20 years. It’s generally less expensive than whole life insurance. You can usually convert a term life insurance policy

2. Whole Life Insurance: This form of life insurance remains in force your entire lifetime, as long as you pay your premium. Because they build value over time, whole life insurance policies can be used as an investment.

3. Universal Life Insurance: This insurance has flexible premiums but can also build value like the whole life policy.

Term Life Insurance is usually the most affordable type of coverage.

The term of the policy usually lasts between 1 and 30 years and pays only if a death occurs during the policy term.

Most term policies have no other benefit provisions.

Term life insurance is flexible coverage that offers your loved one’s financial protection at the time in your life when you need it the most.

When you have a young family or you are just starting out in your career.

Term policies are usually low-cost coverage and during the “term” your insurance premiums will remain constant.

If anything happens to you during the term, then a tax free lump sum payment is made to your beneficiary.

Term life insurance is straightforward and easy to understand, it can be converted in the future to a whole life or universal policy as your financial situation changes.

To qualify for term life insurance, you may have to take a medical exam, sometimes called a life insurance exam.

Medical exams are often required because the coverage amounts are high.

Because term life insurance is straightforward and doesn’t accumulate cash value, the premiums are relatively low (depending on your age and overall health) compared to whole life insurance.

The reason you can find lower premiums for term life insurance policies is that the coverage is only good for a specific period.

But term life insurance premiums depend on several factors.

For instance, they will vary depending on whether you are a smoker or non-smoker, your age, and any pre-existing health conditions you may have.

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What is Term Life Insurance?

This insurance provides protection for a specific timeframe, for instance, 20 years.
It’s generally less expensive than whole life insurance.
You can usually convert a term life insurance policy into a whole life insurance policy.

If your income is low or you are just starting a family, Term Life Insurance is a good option.
Term Life Insurance is great to have to cover expenses like mortgage payment in case of your death but provides no cash value.
There are conversion windows (a period when you’re allowed to change the type of policy you have).
The conversion period is the policy period you have the option to convert to another product (ideally whole life) at the rate/age you were at when you got the policy.

Benefits: Cheap and lots of coverage. Consider buying in units of $1 Million.

Cons: Doesn’t last forever, your policy does not build value, you get nothing if you outlive the policy or stop paying.

How long should my term life insurance be?

If, for example, you’ve got a $500,000 mortgage to pay off over 30 years, a $500,000 term life policy that insures you for 30 years would be a perfect fit and won’t cost an arm and a leg.

Is it better to buy additional life insurance coverage at work or buy a term life insurance?

If you are insurable, get insurance on your own first. You probably will get more for your buck.

Meaning, group insurance from work is usually at a standard rating (same as smoker) if you are healthy, you can get a better deal elsewhere.

Also make sure the group insurance from work is portable.

A lot of those plans end once you leave the employer.

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