The Two Most Important Things about Term Insurance
Term insurance provides the highest death benefit for the lowest cost and is the quickest way to replace lost assets in the event of a premature death. Term insurance is pure protection for a specified period of time. If cost is not as much of a factor, permanent life insurance provides lifetime protection while including benefits such as tax deferred growth of the cash value.
One of the most important things about life insurance is to obtain the right amount of coverage. That is why it is important to have a complete Needs Analysis prepared - to make sure you have the right face amount. Most people need more insurance than they think. But at today’s low cost, there is no reason not to have the right amount of life insurance for the right length of time. Even when a large amount of coverage is required, no other financial vehicle can provide the funds required to replace lost income for such a low cost.
The second most important thing is to make sure that your insurance coverage will last for the right length of time. With 10-year level term, the premium will remain the same for 10 years. With 20-year level term, the premium will remain the same for 20 years. You need to make sure that the term of the policy will last as long as your need for coverage. If you need lifetime protection or if you would like to receive the added benefit of tax deferred growth, then you might want to consider the cost of obtaining permanent life insurance.
Before you obtain any life insurance coverage, however, you should have an insurance professional go over the key differences between the various types of life insurance with you. Certain factors other than price should be considered when buying life insurance, such as benefits, flexibility, the financial strength and the life insurance company ratings, convertibility options, the length of the guarantee period and optional riders, etc.
An insurance professional should also have information about the underwriting guidelines of various insurance companies in order to obtain the best rating for you based upon personal factors such as your height and weight, your blood pressure, your cholesterol, any medical conditions you might have and whether there is any history of heart disease or cancer in your family prior to age 55 or 60.
After you determine the right amount of coverage and the right length of time – based on your personal and financial situation, you can decide whether you want term insurance which provides pure protection for a specified period of time or permanent life insurance which provides lifetime protection in addition to living benefits such as tax deferred growth of the cash value.
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