Term Life Insurance: A Basic Explanation
If you’re just getting started learning about life insurance basics, term life is a good place to start because it’s probably the simplest form of insurance available. Term life simply offers you a fixed premium payment schedule over a defined number of years, and in return for keeping up with your payments your heirs are guaranteed a payout amount in the event that you pass away during the life of the policy.
In addition to having such a simple definition, term life insurance is very popular because it is by far the cheapest form of insurance protection you can buy for your family. A quick Internet search will show you just how much insurance you can buy for no more than the cost of a few large cups of coffee at Starbucks, per month. The reason why insurance companies can offer so much protection for such a low price is because they are rarely obliged to pay out on term life policy. The fact is that you are statistically very likely to outlive your policy, and this keeps premiums low.
Often insurance agents will attempt to sell you on more expensive forms of life insurance, such as so-called “permanent” insurance like whole life or universal life. While these policies have a guaranteed payout at some point in the future, and they also have an investment component associated with them, most unbiased experts agree that permanent life insurance is not the best way to manage your long-term investment portfolio. Permanent policies are much, much more expensive than term life insurance, leaving you with much less disposable income each month, with which you could establish an investment portfolio for yourself.
All in all, for most people, especially if you’re young and just starting a family, a good term life insurance policy with a term of 20 to 30 years is probably your best bet. The fact that you are statistically unlikely to collect on the policy does not mean that you should not take it out in the first place. The idea behind life insurance is protection for your loved ones, and for most people low cost term life insurance is worth the peace of mind.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.