3 Common Questions about Term Life Insurance Answered
Photo by Rohit Farmer
Life insurance is highly recommended to someone who has dependents. In case of premature death, you can rest assured that your loved ones will have enough money for their needs at least for the first few months. There are two main types of life insurance so most people’s first question is which one is right for them? For those who just want a death benefit, term life insurance is the more affordable option.
What Is Term?
The main difference between term and whole life insurance is with the policy’s duration. The term type is purchased for a certain duration such as 10, 20 or 30 years. It expires after the specified duration. If the policy holder dies while the policy is in effect, his or her beneficiary will get the death benefit. If not, the policy holder has the option to purchase another policy. On the other hand, whole life insurance is in effect as long as the policy holder pays for the premium. It’s important to note that some insurance companies offer a variation of these two main types of life insurance.
Term life insurance is way more affordable than whole life insurance. Why would people choose whole over term? Good question. People who want to accumulate savings while having protection can do so using whole life insurance. This is something that’s not offered in term type of life insurance. In addition, dividends are also given to whole life policy holders. Again, this is not offered if you choose term insurance. To put it simply, you can choose term insurance if you are just after the death benefit for your beneficiaries.
When Should You Buy Term?
Life insurance is not required but it is good to have. It is a great way to secure your family’s monetary needs. So, when should you buy life insurance? Another good question but there is no definite answer. It all depends on your responsibilities, dependents, etc. It is also worth noting that life insurance is cheaper while you are younger. It gets more expensive as you get older and if you develop diseases that might cause pre-mature death. This is why a medical checkup is required when you are purchasing life insurance regardless if you want term or whole.
Will There Be Taxes on Death Benefit from Term?
Aside from premium amount, most people also want to know the tax on the death benefit. However, this is something that you shouldn’t worry about. You or your beneficiaries will not have to pay income tax for the death benefit with term life insurance.