The responsibilities left by a policy holder at the time of his death may include sick care costs incurred during the time of his ailment, debts or loans and mortgages, education and subsistence of the dependents, funeral expenses and other financial obligations. To cover the said costs, term life insurance takes one step forward to provide assistance to the family of the policy holder. Since term life insurance policies are usually cheaper and easier to obtain more people opt to avail of such plans for the protection of their loved ones.
One important function that is assumed by a term life insurance policy is to provide annuity to the beneficiaries which would otherwise redound to their benefit if only the policy holder would have lived a full life. With full life, it means that an individual lives long enough to retirement age when he would have been entitled to retirement savings and bonuses from his employment. In case however that the person is not lucky enough to enjoy life up to such age, the funds expected to be awarded on his retirement can no longer be availed of. This is where term life insurance comes in to compensate for the loss of probable future income for the welfare of the survivors.
Term life insurance as a contractWhen a person signs the dotted portion of a term life insurance agreement, he is in effect entering into a contract with the insurance company that provides the service. It is like entering a deal in which there is a binding pact between the company and the policy holder for the former to assume the financial obligations of the latter in the event of the latter’s death. This is under the assumption that the passing of the policy holder takes place during the period that the policy is in effect. Term life insurance is commonly offered on annual basis. At the end of the annual term, the policy holder has the option to renew the contract for another year or more, depending on the situation in which he is currently in. The insurance policy, in order to be continuous, must be renewed before it reaches its actual lapse period. Otherwise the insurance policy will be treated as an all new account and the policy holder may be required to undergo application process right from the start again.
Guaranteed Level Premiums
Insurance companies usually offer annual term life insurance plans to their clients. This is considered good enough because a person is assured of protection for his beneficiaries for an entire year. However there could be some problems in the renewal in terms of premium rates. Although renewals are treated as continuity of the original insurance contract, the premium rates may vary especially when there are changes in the living and health conditions of the policy holder. Sometimes change of location can affect the rates of term life insurance plans as well as the advancing age and health condition of the policy holder. Under such instances, insurance companies might ask the policy holder to provide more requirements such as medical examinations.
Incidentally, there are types of term life insurance plans that require level premium rates from clients. If your policy is good for five, ten or more years, the premiums will remain the same until the end of the policy term. This is one of the reasons why some people opt for longer periods for their term life insurance plans. They get longer protection while paying for the same rates up to the end of their plan. The only setback with this contract insurance is that you need to pay higher premiums as the insurance policy covers the time when you shall have grown older. And as it is with insurance policies – the older a person gets, the more expensive his insurance policies turn to be.
Best term life insurance
So which is the best term life insurance? The answer lies on your preference, financial capacity and life risks. You have to consider all aspects that include your family needs, job, age, health and occupational risks, and other factors that in one way or another may have impact on your insurability and capacity to pay the premiums.
To illustrate further, consider the following points:
- Your preference for a term life insurance must always be for the best interest of your family and loved ones. Remember that the reason why you are availing of policy coverage is to protect your loved ones from burden at the event of your death. You do not want them to suffer when you are gone. You want them to survive, live well and continue pursuing their aspirations in life and eventually continue the legacy that you have started in this world.
- Your financial capacity is one major concern when picking the best term life insurance protection. Naturally you want to leave a substantial amount for your family to survive on when you leave them behind. But can you shoulder the corresponding premium rates? Can you afford to pay the whole premium package for a million dollar insurance policy? You must be realistic enough to face the truth. Buy a term life insurance policy that you can afford to pay.
- Now think of your occupation and living conditions. Is your occupation hazardous? Are you living in a dangerous neighborhood? Are you engaged in activities that place your life in possible danger? Once again, the premium rates are your primary concern here. Higher risk on one’s life means higher premiums. If you can do something to alter your situation to lower your insurance fees, do so.
- Consider your family’s future needs. Are your children still schooling? Do you have unsettled debts? If your answers to these two questions are in the positive, then you must consult your insurance agent for advice so you will know which policy is best for you.
- You must be aware of your age as well. Do not wait for the time when you grow older before seeking protection. Premium rates for older persons are higher. Besides, you will never know when your time will come. Even young and strong individuals may die at any time hence term life coverage is very important.
Some individuals seek term life insurance only for the purpose of providing expenses for their burial. This is called the final expense insurance. However it must be understood that after the burial, your family has to start over again, pick up the pieces from where you left them. They need seed capital to keep them going. In addition to funeral costs, you must ensure that you also have a term life coverage that will provide annuity for your family so they have some funds to use after you are laid to final rest.
Death is a reality in life. It is sure to come. Nobody is exempted as all of us will go when our time comes. Although nobody can be sure if there indeed is life after death, it would be painful for anyone to leave behind his loved ones with no financial support. Providing them with term life insurance is a good way to ensure that they can move on more easily even without you around.
Your choice of the best term life insurance is in your hands. Nonetheless, you must not forget the tips and considerations discussed here for your guidance and enlightenment. Buying an insurance policy is a major investment. If you live long enough up to the end of its term, be happy because you are still around to continue providing for your family. But when you are equipped with such protection and you know that your family can use the benefit at any appointed time, be happy too because your loved ones have something to lean on at the time of mourning and in time of moving on.
Term life insurance is not the be-all however. You cannot just buy a policy and forget about other ways to ensure financial stability for yourself and your family. An insurance policy is just a means to establish a more solid future for your family when you die but it cannot replace a well planned financial support for them from your own resources. Your job matters. Your savings are important. If you can bring these all together in one fortune pot plus your term life insurance coverage, your family will thank you forever even when you are long gone.