What is Term Life Insurance

Florida Term life insurance is designed for a specific period of time, usually between 5 and 30 years. Term policies are designed in a different way compared to traditional whole life policies, including having a much cheaper premium at the onset of the policy that increases at pre-set intervals over time. As people age, the rate of their life insurance will go up each time they renew their policy.

When the term runs out, there is no obligation to renew the policy or get more life insurance, and it simply goes away. In some policies you have a right to renew it for another term or convert it to some form of permanent life such as whole life or universal life insurance.

Term Life Insurance Types

Term life insurance is a short term, often affordable, life insurance solution. This kind of plan is helpful for those concerned about providing for Term Life Insurance their families or dependents after they pass away, but who may not want to invest in a permanent, long term plan.

The cost for term insurance is less expensive than permanent policies, as it offers no cash value benefits. The premium for coverage is paid each year, and will cover the risk of death benefits for that time period. In the event that the policy holder does pass away, beneficiaries receive the death benefits, tax-free. Term life insurance comes in several policy types as outlined below:

Level Term Life Insurance

This is the most common type of term life insurance because it provides great value, at a low cost. The policy provides a set premium for the length of a term, which can vary from 5 years, to 10, 15, 20, and up to 30. These types of plans often offer the policy holder options when the term ends which include: converting the plan into a permanent one extending out the term.

This kind of plan is very beneficial, as it provides a longer term coverage plan, at an affordable price. One thing to look out for when signing a policy is the guarantee that the rate will stay the same throughout the whole term.

Return of Premium Life Insurance Policies

This is a unique type of term life insurance policy, which will refund all premium payments if the policy holder lives past the designated term. The policy will provide the death benefit to beneficiaries if the policy holder does pass away, however if they make it to the term, the full amount gets refunded tax free.

It is a plan to invest for the future, while also securing the future for any dependents in the case that something does happen. On average, this type of plan does have a higher cost by about 35% when compared with other plans. However, those additional costs are potential savings for the future. It is important to note that keeping funds in the account for the duration of the term is recommended, as if funds are removed early, the refund will be slim to none. This plan is one you can bet your life on!

Annual Renewable Term Life Insurance

This type of plan is renewable on a yearly basis. It is convenient because the plan does not require any proof to be insured in order to renew the plan, until reaching a designated age. This kind of plan can be helpful when a person has unreliable income and needs a plan to hold them over until the next year. Due to the fact that the risk of dying within a 1-year term is relatively low, premiums on these plans are often very affordable.

As a general rule in the life insurance industry, as a person ages, the cost for coverage is going to go up. While costs, can be affordable for a 5-year term at the age of 25, it can be a different story at the age of 40 with pre-existing health conditions. For this reason, it is beneficial in the long run to look for a term insurance plan with good premiums and options for the future.

How much Life Insurance do I need?

Before buying life insurance, you should gather personal financial information and review your family’s needs. There are a number of factors to consider when determining how much protection you should have. These include:

  • Immediate Needs: such as final illness expenses, burial costs and estate taxes.
  • Adjustment Period: funds to finance a move or to provide time for family members to find a job.
  • Ongoing needs: such as monthly bills and expenses, day-care costs, college tuition or retirement.
  • Income needs: When you’re gone income needs for the surviving family will continue. How much income you would need to be replaced and for how long.

Although there is no substitute for a careful evaluation of the amount of coverage needed to meet your needs, one rule of thumb used is to buy life insurance that is equal to five to seven times your annual gross income.

How do I determine the length of term I should consider?

Term life insurance needs to be purchased for the right amount of time so that you avoid paying higher premiums or having to renew too often. For example, a 70 year old person would probably be fine choosing a 10 year policy, but a family buying insurance to cover a mortgage would want to consider a longer term, say 20 or even 30 years to coincide with the number of years left on the mortgage. If you have to renew a policy, your premiums will increase, which is why you should examine your needs carefully.

Do I need affordable Florida Term Life Insurance?

Life insurance is an essential part of financial planning. Three big reasons why most people buy term life insurance is to payoff mortgages, replace income that would be lost with the death of a wage earner, and payoff outstanding debt including final expenses.

The cash provided by term life insurance can help ensure that your dependents are not burdened with significant debt when you die. Life insurance proceeds could mean your dependents will not have to sell assets to pay outstanding bills or taxes.

An important feature of life insurance is that in most cases no income tax is payable on proceeds paid to beneficiaries. The death benefit of a life policy owned by a C corporation may be included in the calculation of the alternative minimum tax.

Choosing An Insurance Plan That’s Right For You

Purchasing life insurance is key to any future financial planning. Life insurance gives you the assurance that when you die, your loved ones will have the funds available to maintain the lifestyle they’ve grown accustomed to.

Other term life options include…

  • Affordable Term life with no medical exam: This type of policy is designed for people that do not want to complete an exam and provide blood samples. These plans are almost always more expensive than traditional term insurance.
  • High risk life insurance: These types of plans typically use traditional term life plans but require expertise and a complete understanding of the underwriting process. With this expertise people that have had cancer, heart surgery, diabetes and many other diseases are able to buy life insurance

Choosing a term life insurance product is an important decision, but it often can be complicated. As with any other major purchase, it is important that you understand your needs and the options available to you. Let our professional insurance advisors help.