Ben Galbreath
Term life insurance is a type of life insurance policy that protects your loved ones in case you pass away while the policy is in effect for a limited time, for example, 30 years. Producer Ben Galbreath discusses how term life insurance works and what you should consider when purchasing coverage.
Why is buying term life insurance important?
Buying term insurance has many benefits. The top two benefits to an individual are amount of coverage and cost; the cost for term coverage is usually very attractive for the amount of coverage you can buy. When you are starting out in life on your own, you will potentially start making decisions with much higher price tags. These price tags come with conditions or agreements. For example, many individuals do not have the cash on hand to put it all down on a home, condo or other residence. Mortgages come into play. Even if you could buy a home outright, you will incur many costs to maintain the home.
Purchasing term life coverage would help you to withstand the time it would take to build your cash back up and protect your family from unforeseen death of the main income or the secondary income. In the instance of your death, the life coverage would be there for your living family members, and then they have options instead of struggling financially and incurring additional debt. The options can range from taking time off to mourn, paying off debt, going back to school, job training, building a new way of life and childcare if you have kids.
What factors affect the cost of term life insurance?
The easy factors to establish are the amount of coverage and how long you would like the coverage. However, it gets more complicated when you start the application process. Many factors come into play to establish your rate of insurance. For example, your auto insurance is rated on your specific vehicle and driving experience as well as recent auto claims.
When it comes to life insurance, the company looks at your morbidity table. A morbidity table is a statistical table that shows the proportion of people that are expected to become sick or injured at each age (Collins Dictionary). Term life insurance is not just calculated on your age and sex; insurance carriers will take many different factors into consideration, including height, weight, blood work, medical history, pre-existing conditions, past medical documents and others.
How should you decide between term life and whole life insurance?
If you were to poll different advisors/life agents this exact question, you would receive many differing views when it comes to term or whole life insurance. Term insurance and whole life coverage serve two very different objectives.
Term, as the name suggests, is coverage that you purchase at an agreed value (death benefit) offered by the company to you for a set number of years (the term) at a set cost. Whole life insures you for as long as you pay the payments. Whole life has many other benefits to it like cash value, growth (depending to the type decline) or other options. Term coverage costs are much lower than whole life coverage in comparison to the same individual. Term rates are established for only a set number of years and at the end of those years, the policy/coverage ends with no cash value to you.
When you visit your life specialist, they need to look out for your best interest, and how you would like the coverage to benefit you/your family and work alongside your investment plan. Advisors need to evaluate your whole portfolio and create a package best suited for how you invest and what you are looking for at the time of purchasing life insurance. Most individuals choose term coverage due to the cost for the amount of coverage you can buy. Most debt has a term so many individuals purchase the life coverage for the term to cover the debt taken on. Whole life is used more frequently when it comes to business settings, e.g. buy sell agreements, key man coverage and many other benefits for upper management. It is sold as a benefit to the individual.
Questions about life insurance? Contact Wallace & Turner at (937) 324-8492 in Springfield, (937) 652-8492 in Urbana, or info@wtins.com.