According to the Institute of Insurance Information, at least 60% of Americans have some type of life insurance. However, one out of 5 people who have life insurance still says that they do not have enough insurance coverage.
When looking for a life insurance policy, you want to make sure that you buy the best policy that will offer your family a much needed financial protection when you die. This is where term life insurance comes in.
There are several benefits of term life insurance. This insurance is not only affordable, but it is also straightforward, and this makes it a great choice. Read on to learn more about this insurance and what it can offer you.
What Is Term Life Insurance?
This is one of the most common ways of creating a financial safety net for your family. This insurance lasts for a particular period before it expires. If you die, your term is up.
Upon your death, your beneficiary is given a tax-free lump sum payment. They can use the money given to pay bills such as funeral costs or as they deem fit. Several people consider this insurance because it provides immediate estate to their loved ones.
It is important to note that a term insurance policy is more than one product. There are different types of insurance policies included in this policy to meet the needs of the client.
Term periods also last between 10 and 30 years, and you will pay annual or monthly premiums to keep it active. Before buying this policy, you may want to get term life insurance quotes from different providers so that you can compare the cost.
Here are some of the benefits of this insurance:
1. Fast Payment
With term life insurance, the proceeds are not considered as part of the probate estate. This means that the proceeds or money is paid to the beneficiary is released immediately after your death. This is especially easy if the estate is not named also as the beneficiary.
If this is not the case, the estate administration will have no reason to hold back the payment, and the named beneficiary will get the money fast.
2. High Benefits at Low Premiums
Term insurance offers one of the most considerable amounts of financial protection at a low cost. Though this does not mean that this policy is the least expensive when compared to other life insurance policies, its value is quite reasonable and ideal for young families.
For example, if you are 35 years and you choose a $100,000 Trust, you will pay a premium of around $200 a year. With whole life insurance, you will only get $14,000 for the same premium.
3. The Policy Can Secure a Loan
If you have a good credit limit, you can use your term life insurance policy as collateral for a loan. This is mainly referred to as a policy loan. In as much as lenders mostly prefer permanent policies for loans because they have a better cash value, term policies are also sufficient only if you are a good credit risk.
With good credit, lenders can give you the loan because they can be sure that the loan will be repaid if you do not die.
4. The Benefits Are Exempt From Taxes
The proceeds or death benefits in this type of insurance policy are not subject to federal income taxes. They are also not considered as taxable income, and this means that the beneficiary will get the complete payment.
If the beneficiary is a surviving spouse, the benefits are also exempt from estate tax. This prevents the surviving partner from paying a lot of money to the federal government. However, in cases where there is no surviving spouse, and the benefits have to be paid to the siblings or children, the benefits will be subjected to estate taxes.
5. Young Clients Can Get More Coverage at Low Costs
Since this insurance is short term, younger people can get a considerable amount of coverage at a low immediate cost. This can be even lower than their needs at first. It also means that they are guaranteed to have the right level of coverage once their family obligations and needs increase in the future.
This will remain the same even if they turn out to be uninsurable in the future.
6. A Good Alternative for Temporary Life Insurance
This insurance policy offers a very good alternative for temporary life insurance needs. If you need protection for less than ten years, this may be the right life insurance policy for you. This is because whole life insurance policies pay more if they take longer to be claimed.
You can also choose to consider some cash value life insurance if the protection must exceed 15 years. Take time and review your insurance period.
However, term insurance offers better cash value if the policyholder is below 45 years. If you are older than this, you may not get the best deal because the protection is always between 10 and 15 years.
7. The Policy Is Private and Can Serve Specialized Needs
One of the best things about term policy is that it is very confidential. No record of the benefit or the beneficiary is made public even if the beneficiary is not part of the deceased estate. This helps to keep the privacy of the beneficiary.
The different types of term insurance can be combined with other life insurance policies to create one package that meets the policy holder’s special savings, protection, and special death protection needs.
Consider These Benefits of Term Life Insurance
These are some of the benefits of term life insurance that you can get to enjoy if you choose to buy this policy as your short term life insurance cover. Remember, this insurance is flexible and will reflect the changes you make to it. Therefore, do not forget to change it over time.
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