If you’re asking yourself whether life insurance is worth it, the answer is simple. Yes, life insurance is worth it — especially if you have loved ones who rely on you financially.
Life insurance acts as an important financial safety net if you were to pass away suddenly. Term life insurance, in particular, provides coverage at an affordable price during the years your financial dependents need it most.
Learn more about term life insurance, how it works and why it might be an important part of your financial plan.
What exactly is term life insurance and how does it work?
Term life insurance is worth it if you’re looking to help ensure financial security for your family at a budget-friendly price. It’s a simple, affordable type of life insurance plan that covers your family for a set period of time, typically 10, 15, 20 or 30 years. You choose a term length that matches the time frame of your financial responsibilities. For example, until the children are adults or your mortgage is paid off.
In exchange for monthly or yearly premiums paid for the duration of the term length, a life insurance policy provides financial protection to your family. If you were to die within the term length, a payout called a death benefit would be paid to your beneficiary or beneficiaries. The proceeds from the death benefit can be used to help pay for financial needs – those that come with death, such as funeral arrangements and other end-of-life expenses, along with day-to-day bills like the mortgage and child care.
You might be wondering what happens once the term length is over. Well, coverage ends. You don’t get back the premiums paid (similar to car insurance). But that’s the point: to have affordable coverage in place during those pivotal years just in case something happens.
Who needs a term life insurance plan?
If you have loved ones who are financially dependent on you — like partners, children, siblings or parents — then buying life insurance coverage is absolutely worth it. Even if you don't have financial dependents yet, life insurance can be a valuable solution for making death easier on a family (at least financially.) The payout from a policy can help cover financial obligations like funeral expenses or help pay your outstanding debts, if any. It can be your financial legacy.
A simple way to understand if you need term life insurance is to use an online life insurance calculator. It will take into consideration your age, income, family structure and more to provide you with a personalized recommendation. A life insurance calculator will also tell you if you don’t need coverage at all.
In short, term life insurance is a worthwhile (and affordable) way to help financially protect your loved ones. A policy’s death benefit could help:
Replace lost income and pay living expenses, like rent or a mortgage
Pay debts you leave behind
Provide for your kids’ care if you are a stay-at-home parent
Pay for burial, estate taxes and other final expenses
Fund college costs
Pay unpaid medical bills or taxes
Create an inheritance
For a small amount of money, you can support your family’s financial well-being even after your death — and if you need another incentive to become a life insurance policyholder, remember that the death benefit your chosen beneficiaries will receive is typically tax-free.
What does term life insurance cost?
The cost of a term life insurance policy will depend on your age, gender and health as well as the term length and coverage amount you choose.
What are the alternatives to term life insurance?
An alternative to term life insurance is permanent life insurance — a common type of permanent coverage being whole life insurance. Here’s the biggest difference between term and permanent life insurance: Term insurance covers you for a predetermined number of years (the “term” length), and a permanent life insurance policy covers you for the rest of your life.
With term life insurance, you decide how long you anticipate needing the coverage — until the mortgage is paid off, until the kids graduate from college or until you retire — and select a term that corresponds to that length of time. If you die before the coverage term ends, the death benefit is paid to your beneficiaries to help cover financial obligations.
With a whole life insurance policy, you pay for lifetime coverage. The policy also includes a cash value feature that accumulates over time. Taking out loans from the cash value built up in your life insurance policy can be a way to help pay expenses such as retirement costs or your children's college costs. (t’s important to know that accessing your policy’s cash value, through borrowing or partial surrenders, reduces its cash value and the death benefit. It also increases the chance the policy will lapse, and may result in a tax liability if the policy terminates before your death. And, some whole life insurance policies (those that are “participating”) have the potential to earn dividends. However, dividends are not guaranteed.
The other big difference between the two types of life insurance is price. Whole life insurance is significantly more expensive than term; in fact, the annual premiums are often five to 10 times more expensive for the same dollar amount of coverage, which can be cost-prohibitive for many. Term life insurance is simpler-to-manage, more affordable and a solid option for many families. You can even apply for term life insurance online, in a matter of minutes.
For more information about Life Insurance call JCT Insurance Agency at (626)354-2000 or email jctfinancialsvc@gmail.com