This is a guest post from Charan Sing, CEO of Select Quote, the leading online source for term life insurance information. I was excited to publish this article because I’m a big fan of term life insurance and consider the best choice for almost every situation because term life insurance is so cheap. Depending on your needs, of course. Enjoy!
Every month almost one million Americans consider and purchase a new life insurance policy. In today’s economic environment, when consumers are often looking to reduce costs, what are the most affordable ways to protect a family?
Life insurance is the foundation of a smart financial plan, particularly when there are family and loved ones who depend on a person’s financial support . All other financial planning can be for naught without the foundation of life insurance in place.
Types of Life Insurance Depend On Your Need
There are two basic categories of life insurance: term insurance and permanent insurance. The primary difference is that term insurance is pure insurance. It pays only if death or other defined event occurs during the specified term of the policy, typically 10, 15, 20, or 30 years. Because the policy specifies a particular time period during which an individual and his or her family are protected, the carrier is essentially taking the “risk” that the insured party won’t make a claim during the specified term, and that is a more limited risk than absorbed in permanent and whole life policies. This makes term insurance generally less expensive and more flexible than other life insurance policies.
Permanent insurance policies, such as whole life, are just that—permanent. They accrue cash value over the insured’s whole life and perform more as investment instruments than as pure insurance. This generally makes them more expensive, because, of course, everyone dies eventually and the odds are 100 percent that the insurance carrier will have to pay a claim as long as you continue to pay the premiums.
Best Ways of Saving Money is Term Life Insurance
Thus, going with a term insurance policy is one of the best ways to save when considering life insurance options. Term insurance typically provides the most coverage for the dollar, the best value.
For example, parents with young children and a limited budget might start with a term policy of 15 years—long enough to keep their children safe until they are independent – or until greater family wealth is built up over time. If the family still needs life insurance at end of that term, when the family income is likely to be higher, they can convert to a larger term policy or one of the higher-priced permanent or whole life insurance products.
Term insurance is particularly applicable in the current economic environment and for people such as (a) parents with children, particularly young children; (b) for people with older dependent children and dependent elderly parents; (c) for entrepreneurs starting a new venture or who are critical to their family or small business; and (d) even for young professionals with no dependents who are looking for an affordable insurance option.
Research Term Life Insurance Online
Another way to ensure that you are getting the best value when purchasing a life insurance policy is to conduct research online and compare prices for different policies. Life insurance costs can vary widely depending on variables such as age, health, and whether or not a person smokes. There are a number of websites that provide life insurance information and prices quotes. SelectQuote Insurance Services, www.selectquote.com, is the nation’s number one term life insurance sales agency, and offers consumers quotes and comparisons from more than a dozen of the country’s leading insurance carriers.
Finally, in an effort to save when purchasing life insurance, I would encourage you not to under-insure yourself or your family. A common problem insurance experts caution about is that most people mistakenly think that they have sufficient life insurance coverage through their employer.
What About Group Policies?
Experts say such group policies should be considered supplemental only. Such group benefits are often set to a maximum benefit that can be significantly less coverage than is recommended for an individual or family’s personal needs.
In addition, employer-provided group life insurance is usually limited to the length of employment. When the individual leaves their company, the term expires, and they are no longer insured. If an employee is moving to a different job, remember that some employment benefits don’t kick in right away and the insured can fall through an insurance gap. Additionally, if a person is laid off or the company fails, they are at risk when they can least afford it.
I encourage you to secure your family’s future with life insurance, and speak from experience when I say that term life insurance can be an affordable way to do so. Whether you are your family’s primary income producer or its primary caregiver, your dependents need the security and help that life insurance provides.
Finally, I want to thank Jeff Rose and Good Financial Cents for allowing us to post here about the value of term life insurance. Jeff has written a few good articles himself on Term Life Insurance, including on examining, “How Much Term Life Insurance Do You Need to Buy?” I hope you’ll take a moment to read up further on the topic, and keep in mind that life insurance is the foundation of any financial plan.
Charan Singh is the founder and Chief Executive Officer of SelectQuote, (www.selectquote.com) the leading online source for term life insurance information, comparisons and products. Singh previously served as a leader of insurance services at Charles Schwab, and has more than 25 years experience in the financial services and life insurance industries.
photo credit: Ev0luti0nary
Investors should carefully consider the charges and fees associated with a new insurance policy as well as any costs associated with surrendering the current policy.
Term life insurance is always the cheapest option and for many consumers the mantra of buy cheap and invest the rest may be what many shoppers are looking for in a tough economy.
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