Term life insurance is one of the simpler forms of life insurance, but it is a key component of your overall financial plan. It is important to keep in mind that term life insurance is not a substitute for retirement planning—it has no savings or investment component. Similar to auto insurance, term life insurance provides coverage only for a specified period of time and then expires.
Individuals considering a term life insurance policy can either choose a yearly renewable term life insurance policy or a level term life insurance policy. With a yearly renewable term life insurance policy, the premium changes each time the policy holder renews the policy. A level term life insurance policy has a set premium for some specified period of time.
Term life insurance offers policy holders more flexibility in managing their financial obligations over time. Individuals with significant financial obligations, such as paying a mortgage or covering the cost of their children’s education, are ideal candidates for term life insurance policies. Parents often choose to purchase term life insurance policies to cover them until they retire and their children are done with college.
The best time to purchase a term life insurance policy is while you are in good health—people who are older in age or who have preexisting medical conditions may not be able to afford this type of coverage. Remember, term life insurance is not a form of saving; however, it is an important aspect of your financial planning.
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