x
Newswire.com - iQuanti
Term life insurance is a form of life insurance that offers coverage for a fixed period. It's quite simple, offering fewer features than its permanent life insurance counterpart. Yet there are still myths and misconceptions around term life insurance policies. Knowing the truth can help you find the right policy for your budget. With that in mind, this article will dive into five things you might not know about term life insurance.
Term life coverage doesn't last forever. Once the term ends, your coverage expires. You'll then need to get a new policy to continue your coverage or, if you have a renewal rider, exercise that rider to renew coverage. Depending on your needs, you can choose a term length from 10 to 30 years. Keep in mind that longer-term lengths may cost more in monthly premiums.
You may be wondering, "Does term life insurance have cash value?" Term life insurance comes without the lifetime coverage and cash value features of permanent life insurance. However, this makes it a less expensive option. For example, Forbes found that a 30-year, $500,000 term life insurance policy would cost only $457 per year for a 30-year-old man on average. However, that same 30-year-old man would pay $4,823 per year on average to get a $500,000 whole life insurance policy.
Life insurance riders are additional forms of free or paid coverage you can get to customize your term life insurance policy to your needs. For example, many insurers offer renewal riders term life insurance. This allows you to renew your policy at expiration without going through a new medical exam to guarantee coverage, although your premiums will increase.
Another example is the inflation rider. This can increase your death benefit by 3% to 5% each year to keep up with and potentially beat inflation. As a result, you preserve your death benefit's value in times of higher inflation. When inflation is low, the rider helps grow your death benefit for a low cost.
Life insurance death benefits are typically not taxed. This makes term life insurance an excellent financial tool in several situations. For example, if you pass away during the policy term, your loved ones get the full death benefit without losing any money to taxes. This helps them replace more of your income and cover more debts.
You can also use term life insurance as an affordable estate planning tool. When you pass away, your heirs could receive more of your wealth, since the death benefit will generally avoid estate taxes.
According to LIMRA's Insurance Barometer study, many life insurance applicants would prefer to get a policy without a medical exam. This is because the exam can delay the process several weeks and may be inconvenient, whether you travel to the examiner or they come to you. Some people even find certain components of medical exams, such as taking blood samples, invasive.
Whatever the reason, you can get a term life insurance policy without a medical exam if you shop around and look for no-exam policies. This helps you get a policy much faster and with less inconvenience. But keep in mind that skipping the medical exam may result in higher premiums.
The bottom line
Despite its simplicity, there are several aspects of term life insurance you may not know about. Coverage can expire, but it's typically more affordable than permanent life insurance. You can add more coverage and customize the policy with riders, and the death benefit is generally tax-free. You also may not need to take a medical exam, since there are plenty of no-exam term life policies out there.
Now that you know more about term life insurance, you can look for a policy with confidence. Make sure to shop around to get multiple quotes — this will help you find the most coverage for your needs and budget.
