5 Things to Know About Term Life Insurance

1. 5 Things to Know About Term Life Insurance Term insurance, unlike other types of life insurances, provides protection only when the insured person dies within the set term, with little or no lifetime benefits. This means no cash values are payable when you buy term insurance. However, the premiums come at a lower cost, so it is the best alternative if you have temporary life insurance needs. But there are important things that you should know about term life insurance and here are they: 1. Add Riders: What is a rider? A rider is an insurance policy provision that amends the terms of a basic insurance plan. In term insurance, you can add riders to cover the beneficiaries under specific circumstances if you (the insured person) die, face disability, or get any critical illness during the period of the policy. Adding rider to the term insurance helps to trigger a payout during specific circumstances. Your loved ones will be taken care of should you pass away before the term. 2. Convert Term Insurance: There is a type of convertible term life insurance plan that lets you convert term life coverage to whole life coverage. This way you can lock-in your paid premiums and build cash value from the term insurance. 3. Cannot Use as Loan Collateral: Many lenders do not accept term insurance policies as collateral because these policies have short terms and do not accumulate cash value. However, lenders sometimes accept life insurance policies as loan collaterals if the borrower has a good credit score. Therefore, if you know you may have to borrow money or take up a loan for some reason in the future and planning to buy an insurance policy now, consider comparing term insurance vs life insurance. Each insurance plan has its own advantages and disadvantages. Knowing the differences would you help you make the right decision. Also, be aware of loan sharks if you may need to borrow money in the near future. You must know how to identify a scammer when investing money or borrowing money. 4. Exempt from taxes: The death benefit from term insurance is not subject to federal income taxes and are often exempt from state inheritance taxes. 5. Cut-off age and terms: You can take term insurance for 10 years, 20 years, and 30 years. You can also buy this policy up to age 65. The terms and cut-off age can vary from insurer to insurer. Conclusion Term insurance policies are great in certain situations but you must compare term insurance vs life insurance to know if it is the right option for you. Term insurance is the best alternative for younger families as they can get the greatest possible coverage for the lowest premiums. As the earnings increase over years, they can convert it into whole life insurance and pay higher premiums.