Outside of how much term life insurance
to purchase, the other key concern is
how long or what term the insurance
should be purchased for. These two
factors really determine cost so let's
take a look at the question of "how
long?"
Term
life terms usually come in fixed periods
of time running 5, 10, 15, 20, 25, or 30
years depending on carrier. One of
the reasons that term life insurance is
so much less expensive than whole life
insurance is that the carrier is only at
risk for a period of time. Whole
life insurance can continue...well..for
a person's whole life. The analogy
of renting life insurance (term) versus
owning (whole) is usually thrown out
(most likely by someone selling whole
life insurance!). Life insurance
is quite different from home ownership
(the basis for the analogy). One
is an asset while the other is
protection from risk. Whole life
insurance can be 10 times the cost of
term.
The
key to
term life insurance is that you
use it to protect against a defined risk
or to mitigate a defined financial
responsibility. The most common
goal is to provide for loved ones in
case of the loss of an income provider
be it the sole or partial provider.
This is a common concern for families at
all stages from newlyweds to older
adults whose children have already left
the house. Typically, people
underestimate the financial strain a
loss puts on the their families.
If you were to imagine not only the
stress of the loss but the financial
impact of everything falling on the
other family member(s), it becomes
apparent pretty quickly how important
sufficient term life insurance
protection can be.
Let's
look at some typical term
considerations.
Newlyweds/families with young children.
The
cost of raising children is estimated at
a quarter of a million dollars from
birth to college these days and that
will only increase with time.
Clearly, the concern for newlyweds or
families with young children is to
provide financial protection out to
where the children are adults and
ideally through college (another ever
escalating expense). This would
argue for a longer term period between
20-30 years. Keep in mind that for
a given budget, the longer the term, the
less coverage can be purchased for the
same
life insurance premium amount.
There's a trade off and it's best to use
the instant quote engine to run multiple
combinations of term and term life
amount to find the right "mix" for your
budget.
Established family with/without older
children.
As mentioned above, college becomes a
key concern for this group. College is
estimated at $20K-$40K and that amount
will grow significantly into the
foreseeable future. Paying off
existing debt and/or assets also becomes
a competing consideration.
Mortgages, business debts, credit cards,
and loans should be equally considered
along with income replacement to get
past the college years successfully.
Older
adults
For adults who no longer have the
intense financial responsibility of
children, the shift is towards providing
for debt/asset payoff and income
replacement over a shorter period of
time. Term is ideal here as well
due to the significant price savings
versus whole life for equivalent amounts
of coverage. Age is the primary
factor in determining cost so buiying
term life insurance at an older age can
be expensive. Whole life almost
becomes out of the question for any
amount of significant coverage as it's
typically 10 times more expensive than
term life insurance.
The
best approach is to try multiple term
limits when you run your
instant term
life insurance quote on our free engine
to find the right "mix" for you.
|