Term Insurance can protect your family—if chosen wisely
Congratulations! You have been married within the past few years, you have one or more children, and yet another one on the way.
But suddenly, someone in passing put a damper on your happy life. What if something happened to you? Who would pay the mortgage on that beautiful new house?
Who would pay to raise the kids, keep clothes on their backs, put money aside for their college education? Would your spouse be plunged into desperate straits, forced to take a job, put the kids in a state supported daycare, driven to apply for food stamps?
You have life insurance "on the job," and that's okay as far as it goes. It will usually be equal to one time your annual salary, unless you have money taken from your paycheck to pay for more. Sometimes it will give you a bit on your spouse. Large companies even provide a little in the event of the death of a child.
But did you know that if you lose the job—via lay-off, illness, retirement or an unexpected relocation, the insurance stays with the job. Even people who worked 30 years for one employer—rare these days—are suddenly discovering that their insurance after retiring is a tiny fraction of what it was when they were working, and it may have a premium they can't pay out of their social security. They are being forced to take small policies just to cover final expenses. The people to whom they hoped to leave a legacy are out of the picture. Furthermore, a much higher percentage of deaths among young people occurs when the wage earner is out of work—either between jobs or for an extended illness. Do you really want to take that chance?
These scenarios are very real. However, they aren't meant to scare you. Even though most of your income is going to pay that high mortgage and raise your growing family, you can get life insurance that will leave them secure for several years in the event of your death.
Term Life insurance is a cheap, affordable option, with face values available up to half a million dollars or more, depending on your needs. You can add riders such as a spouse rider, children's riders, and even disability riders that will pay your premium in the event that you should become disabled. Furthermore, if you have a Life Insurance policy with your bank listed as a beneficiary for the amount required to pay the mortgage, many banks will forgo the expensive decreasing term mortgage insurance.
However, don't rush out and grab the first Term policy that finds its way into your mailbox. The following are questions you must ask to effectively "shop" the best US policy, at a good rate, that will not leave you feeling burned and frustrated later in life.
- Can both the original policy and any riders be converted to a WHOLE LIFE or UNIVERSAL policy prior to the maturity date of the original Term. Good companies will allow you to convert all or part of the face value of the term to any other type of policy they offer—without medical underwriting. NEVER purchase a term policy where the only conversion option is Annually renewable or decreasing term.
- Is the premium Level? Pay a few dollars more to get a premium that won't change for the duration of the Term.
- What are the exclusions?
- When do the riders expire?
- Does the policy have a double-indemnity feature in the event of an accident?
- What is the purpose for the insurance? When the time period runs out, will you need as much insurance? If the answer is "yes," you should look at Whole Life or Universal Life before settling for a Term.
- When purchased from a reputable company with well-trained agents, Term life can give you the security you need for your growing family, and still leave most of your income in your pocket.