- The purpose of term life insurance is to provide a death benefit to your beneficiaries within a limited time context. For example, the term policy may provide death benefit protection for 10 years. If you die within this 10-year time frame, then the policy pays the death benefit to your beneficiaries. If you die outside of this 10-year time period, or you die when the policy is not in force, then no benefits are paid.
- The temporary nature of term life insurance means that you should be focused on what exactly you are insuring and why. In addition to this, life insurance provides money to your beneficiaries. Often, this money is meant to pay for financial promises or obligations you've made. What if you outlive the term of the policy? You'll need to accumulate an amount of money that will pay for what remains of your obligations at the end of the term contract.
- Term life insurance is good when you have a high amount of debt and low disposable income or low savings. Term policies allow you to purchase a large amount of life insurance for a relatively small amount of money in relation to the death benefit. Therefore, you should purchase term insurance when you don't have a lot of money but still need some way to insure your life.
- Consider buying the longest term policy you can afford. While this might increase costs, you'll be protected for a longer period of time. This is important if you take on additional financial liabilities to replace liabilities paid off during your lifetime. For example, if you take out a car loan and pay off that loan, the need for insurance disappears. But, if you buy another car, then you'll have a need for insurance again. A 30-year term policy can provide 30 years' worth of car loan protection.
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