TERM LIFE INSURANCE...
What is Term Life Insurance?
Term Life Insurance is the simplest form of life insurance. It is also the most inexpensive.
It covers you for a specific term. During this period of time, your premiums do not change.
Like all life insurance, term life insurance is an agreement between you and the life insurance company. You agree to pay a predetermined premium rate. Your life insurance company agrees to pay a sum to your beneficiary if you die—as long as you were still paying your premiums at the time of your death.
Other common names for this type of life insurance are or level premium insurance. Purpose of Term Life Insurance: Term life insurance is most commonly purchased for the following reasons:
- Cover debts / liabilities (i.e.home motgage).
- Sustain your spouse's standard of living.
- To provide for your children until they are of age.
- To pay for schooling or daycare for your children.
- To fund a buy-sell agreement for your business.
- Protect your business from a key employee death.
The purchase of a term life insurance policy is one of the easiest ways to provide for the financial well-being of your family or business.
Why should I buy life insurance?
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:
Replace income for dependents
If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.
Pay final expenses
Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
Create an inheritance for your heirs
Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
Pay federal "death" taxes and state "death" taxes
Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal "death" tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level "death" taxes.
Make significant charitable contributions
By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy’s premiums.
Create a source of savings
Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of "forced" savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim). |
