Should I Get Life Insurance?
Art by Jonan Everett
I’ll be honest: I didn’t know much about life insurance until recently. It seemed like something that only old people needed to worry about. Turns out, anyone with any kind of asset or dependent should know about it. I found myself wondering, “Should I get life insurance?” So I waded into the pool and educated myself about term life insurance.
What Is Term Life Insurance?
Term life insurance is a type of life insurance that has a set period — that is, a term — of coverage. When the term expires, so does your coverage. If you die within the term of coverage, your beneficiaries receive a payout. If you don’t die within the term, then the insurance and its benefits simply expire.
Term lengths, which vary and depend on the insurer you choose, are usually set at five, 10, 20, or 30 years. Term life insurance is a pretty basic type of coverage, but there are a few more details to be aware of.
Further Reading: “3 Reasons You Should Consider Purchasing Life Insurance”
Types of Term Life Insurance
Term life insurance is generally low cost, which makes it attractive to younger and lower-income people. Below are some types of term insurance — and some details of the policies — that you should know about.
Annual Renewable Policy
This allows you to set up a length of time during which you’ll be able to renew your policy annually. (The time frame allows renewal without any new medical checks, a part of all life insurance applications.) You have the option to renew the policy annually up to a certain age. Your state has laws that determine the maximum age.
It’s important to note that annual renewable policies are flexible and inflexible at the same time.
With these policies, your annual premium rises each year, which means that you pay more over time. Your payout does not rise, though, so you’re receiving the same benefits but ultimately paying more.
Level Term Insurance
This is a type of term insurance that ensures that your premium will stay the same for the entire course of your term.
Life Insurance Age Limits
Insurers have the right to restrict the age at which you can open term life insurance. Fidelity, for example, only offers it to people who are from 18 to 70 years old.
Sometimes term life insurance policies can roll over into a permanent life insurance policy. This will depend on your provider, and it’s a good idea to ask if this is an option before you sign up for term insurance in the first place.
Further Reading: “5 Ways to Consistently Keep Your Life Insurance Current”
How Much Does a Policy Cost?
The cost of a term life insurance policy will vary by insurer. Companies consider the health, age, and occupation of the individual applying, among other factors, to create an insurance quote.
The shorter the policy, the cheaper it tends to be. The average cost of a 10-year policy is $568 per year, while a 30-year policy is $1,528. You can check out average cost calculations at ValuePenguin.
Should I Get Life Insurance? The Bottom Line
So you’ve gotten the lowdown on the different types of insurance policies. Now time for the big question: Should I get life insurance? Is it an important part of adulthood?
Life insurance in general is something to consider if you have dependents, such as children or elderly parents, who need your financial support. It also helps with the costs of a funeral or a hospital stay.
Term life insurance can be a good idea for young people, whether they’re single or married. Since it’s low-cost and flexible, it’s a better option for younger people who aren’t yet financially able to protect themselves and their loved ones. And with health being a major factor in determining cost, younger and healthier people are likely to get the best deals on monthly premiums.
If you can’t afford a whole life insurance policy, consider getting term life insurance. It does provide financial support for your dependents in the case of death, even though it may lack the potential cash value of whole life insurance.
Further Reading: “5 Types of Insurance Most People Should Have and Why”