On Your Own Terms: How to Find the Best Term Life Insurance
The reality of being a grownup sort of creeps up on you sometimes. One minute, you’re googling “how to adult” and pinning recipes for Mason jar salads that you’ll probably never make, and the next, you’re devoting entire Sundays to meal prep and looking over your monthly budget to see where life insurance fits in.
A term life policy is usually the easiest path to affordable life insurance, but once you’ve decided to go that route, there are a few things you’ll want to consider as you search for the option that fits you like your favorite yoga pants.
The short answer to this question is…NOW!
When you’re young, and strong, and full of hope for the future, it’s tempting to just take your chances. But life is as unpredictable as it is beautiful, and humans are equal parts resilient and breakable. The sooner you buy life insurance, the sooner you can start enjoying the peace of mind that comes with it.
It’s a good feeling to know that the people you love will be better protected financially if the tiny sliver of the pie, that represents the worst case scenario, is the one you are served.
Of course you can use a life insurance needs calculator, but like any math problem, it’s always good to understand the steps. There are a few different approaches to deciding how much coverage you need, but one of the more thorough ones is the “DIME” method.
Debt + final expenses: Add up all your debts EXCEPT your mortgage, plus an estimate of your funeral expenses.
Income: Decide how many years of support your family might need, and multiply your annual income by that number. The multiplier might be the number of years before your youngest child graduates from high school, for example.
Mortgage: The amount you need to pay off your mortgage.
Education: Estimate the cost of sending your kids to college.
Since time is basically the most defining characteristic of term life insurance, this is a pretty important one. The optimal length of your policy’s term varies depending on your situation.
If cost is a major concern, but you know you want coverage right now, 10 year term life insurance might be the way to go. The shorter the term, the less chance there is that a claim will be made (i.e., with any luck, you’ll probably manage to keep yourself alive for at least another decade). That typically means a lower premium for the duration of the policy. Keep in mind that this doesn’t necessarily mean best value in the long run, though, since you’ll most likely need to replace the policy when it expires, and rates will usually increase as you get older.
If you have older children, a 20 year term life policy could be a good option. This will give your kids time to get through college and (with any luck) start making their own money.
If you have young children, maybe a 30 year term is the right choice, since it will be longer before they begin their own journey into adulting.
If you REALLY want to get strategic about it, you might even consider multiple policies...e.g., a 20 year policy to get your kids through school, and a 30 year policy to cover your spouse until retirement.
What About the Future?
As your life changes (and you know it will), your life insurance will probably need to change, too. At the end of a term life policy, you'll generally have the opportunity to renew for another term or to convert to a whole life insurance policy, usually without a new medical exam. However, options may vary depending on which insurance company you work with and which policy you choose, so make sure you get clarification.
Renewing your term life insurance is kind of like trading in your Corolla for a newer Corolla. Your monthly payments will probably go up a bit for the new model, but you’ll have an updated version of something you already know how to drive. Simple, familiar, and dependable.
Converting your term life policy to a whole life policy is more like trading in your Corolla for a BMW. The payments might be significantly higher, but you’ll have more options and perks, and much like a luxury vehicle, permanent life insurance is built to last (like, for the rest of your life, in the case of the insurance policy).
Let’s Do This!
Feeling well-informed and ready to make this term life insurance thing happen? Visit us to connect with the Our Life Covered℠ life insurance experts!