MONDAY, OCTOBER 14, 2013
Term life insurance is one of the most important (and affordable) forms of insurance, but unfortunately, it is often misunderstood by many. Most people buy term life insurance to replace income that would be lost if a wage earner passed away. This is crucial to maintaining a current standard of living, paying for funeral costs, and making ends meet while picking up the pieces after a loved one passes away.
 Term life insurance proceeds are tax-free, and can play a role in estate planning, cash accumulation, retirement funding, and the transfer of wealth to beneficiaries. And a basic term life insurance policy is one of the most affordable policies on the market today.
The cost and features of a term life insurance policy can vary tremendously depending on a few basic essentials.
The “Term”
Term life insurance covers you for a specific period of time you select, generally between 10 and 30 years. It pays benefits only if you die during the time you are covered. Because it has an “expiration date” it is often referred to as temporary insurance. If you do not die within the time limits, you receive nothing.
Benefits
The benefits of a term life policy include the cost, and the conversion possibilities. First, term life insurance typically costs less than other forms of life insurance. Proceeds are not taxable and so they make a great supplemental policy to an employer-sponsored plan, or they may be purchased to make up for inflation, etc. Term life policies also convert to a permanent policy fairly easily meaning you can buy a large amount of term insurance to complement your permanent policy.
Disadvantages
The only disadvantage to term life insurance is the expiration date on your policy. If you purchase a 20-year policy when you are 23, you have to shop for another policy when you are 43. However, you can transfer your term policy into a more permanent policy option if you prefer, or you can purchase a second term policy with your insurance company.
The main choice in purchasing life insurance is determining how much is enough. Generally, your life insurance should be enough to cover your financial obligations. For this reason, the amount of life insurance necessary is different for everyone. If you are unmarried and do not own a home, you need less insurance than someone with a wife and four kids in the suburbs.
Evaluate your current financial obligations including your debt, and obtain a policy that will be a comfortable replacement of your annual income to support your loved ones and avoid leaving a legacy of financial burdens.
By Matt Reynolds - Google+
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