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Term life insurance is a type of insurance that provides coverage for a specified period of time, typically ranging from 1 to 30 years. It offers a cost-effective way to provide financial protection to loved ones in the event of the policyholder’s death.

Key Takeaways

This can help cover expenses such as funeral costs, outstanding debts, and living expenses, providing peace of mind and financial security to families during a difficult time. Additionally, term life insurance is less expensive than permanent life insurance options, making it an attractive option for those seeking affordable coverage.

There is More to Term Life Insurance than a Cheap Death Benefit

Yes, term life insurance rates are generally much lower than Universal Life and Whole Life Insurance since it provides temporary coverage and does not have a cash value component, but there are other reasons to consider purchasing it.

Mortgage Protection

Mortgage protection insurance is a type of insurance that pays off a borrower’s mortgage in the event of their death. This type of insurance is designed to help protect families from losing their homes in the event of a sudden financial setback like losing a breadwinner’s income. The policy pays a benefit to the beneficiary to cover the remaining mortgage balance, which can help relieve the financial burden on the borrower’s family and ensure that they are able to keep their home. 

Tax-Free Death Benefit

In almost every case, a life insurance death benefit is paid to the beneficiary(s) tax-free unless the death benefit is paid to the insured’s estate. Think about the tax liability your beneficiary would have if you were to die with a million-dollar life insurance policy and that the IRS considers personal income.

Income Replacement

When you purchase a term life insurance policy that is sufficient to replace your income, you will provide peace of mind to surviving loved ones knowing that there will be sufficient funds to pay one or more of the following:

  • Balance of the mortgage on the family home
  • Eliminate the balance of any personal loans, auto loans, and credit card balances.
  • Provide the money needed for the education costs of surviving children.
  • Continue funding the retirement fund for a spouse or partner.
  • Pay the monthly living expenses of your surviving loved ones for several years.

Leave a Financial Legacy

Many individuals choose term life insurance to provide a financial legacy to a favorite charity or church.

How to calculate the Death Benefit needed for Income Replacement

If you are buying term life insurance to be used for income replacement, many shoppers don’t understand exactly how to calculate it. Certainly, any insurance professional that sells term life insurance will typically be happy to walk you through it but many insurance shoppers want to know the death benefit needed before shopping for insurance quotes online.

Rather than providing you with a math quiz, we recommend the Life Insurance Calculator provided by Protective Life Insurance Company. Protective offers its Life Insurance Calculator at no charge and there’s no obligation to purchase insurance from them.

After you’ve determined the death benefit needed to replace your income, it’s time to consider various optional riders that will help you customize your policy, broaden your coverage, and provide living benefits.

Optional Riders to Broaden Your Coverage and add Living Benefits

A term life insurance rider is an add-on option to a basic term life insurance policy that provides additional coverage and benefits. Here are some of the most common riders:

  1. Accelerated Death Benefit Rider: This allows the policyholder to access a portion of their death benefit while they’re still alive in the event of a terminal illness.
  2. Waiver of Premium Rider: This rider waives the premium payment if the policyholder becomes disabled.
  3. Guaranteed Insurability Rider: This allows the policyholder to purchase additional life insurance coverage in the future, regardless of their health at the time.
  4. Conversion Rider: This allows the policyholder to convert their term life insurance policy into a permanent life insurance policy without undergoing a medical exam.
  5. Child Rider: This adds life insurance coverage for the policyholder’s children.
  6. Spouse Rider: This adds life insurance coverage for the policyholder’s spouse.
  7. Accidental Death Benefit Rider: This pays an additional benefit in the event the policyholder dies as a result of an accident.
  8. Return of Premium Rider: A return of premium (ROP) rider on a term life insurance policy is an add-on option that provides for the return of all premiums paid at the end of the term, assuming the policyholder has not made a claim. In other words, if the policyholder outlives the term of the policy, they will receive a refund of all the premiums they paid.

It’s important to note that riders come at an additional cost, and not all riders may be available with every policy or insurance provider. It’s important to carefully consider your insurance needs and choose riders that fit your specific needs and budget.

The Bottom Line

Although term life insurance is primarily purchased by individuals looking for inexpensive life insurance, the benefits of term life insurance are plentiful and allow the policyholder to purchase the coverage needed to take care of surviving loved ones.

For more information about the benefits of term life insurance or to get a free no-obligation quote, call the insurance professionals at during normal business hours at 866-868-0099 or contact us through our website 24/7.

Frequently Asked Questions

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Do I get any money back if I cancel my term policy?

Term life insurance is relatively cost-effective because it only pays out a death benefit when you die while the policy is still in effect. Those who survive to the expiration date will not receive anything in return from their term life insurance policy. That being said, most people are fortunate enough to exceed the length of their chosen term plan.

Who is term life insurance best suited for?

For individuals and families with temporary financial obligations, it is wise to consider obtaining a type of life insurance known as “terms insurance. This option can be beneficial for young and otherwise healthy individuals who want to make sure their dependents are taken care of should they pass away. Additionally, even those without long-lasting financial needs may find this sort of coverage beneficial.

How long does term life insurance last?

Most term life insurance policies offer coverage periods of 5 to 30 years (a few companies offer up to 40 years). However, when your renewal approaches you can renew your policy on an annual basis but the rates will be based on your age at renewal and go up with each birthday.

What is the conversion privilege

Most term policies include a conversion option that allows the policyholder to convert all or a portion of their term insurance to permanent life insurance without having to provide proof of insurability.

Richard Reich
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