Deciding If Term Life Insurance Is Right for You

Before you buy life insurance, it's important to understand the demographic categories that make purchasing life insurance a sound financial decision. If you are a single person in your thirties with no children, it is a waste of money to invest in a life insurance policy because you don't have any beneficiaries who would be provided for by it should you pass away. 

Even if you know you are a candidate for life insurance because you have a spouse or children, it can be hard sorting through all the choices available in the life insurance marketplace.

Term Life Insurance Is a Reasonable Choice

Everyone’s personal situation is unique and there is no one-size-fits-all approach to life insurance. However, term life insurance is an inexpensive way of safe-guarding your family’s well-being. Term life insurance is exactly what it sounds like: an insurance policy covering you for a specific period of time, or term (10 years, 20 years, 30 years, etc.).

The coverage on a term life policy varies, but its range is generally $250,000 to $1,250,000. If something happens to you, your beneficiaries (partner or children) receive that amount as a payout, and it is not subject to taxes. If you live through the life of your policy, the policy expires without any value to you and the only amount you are out of pocket is what you spent on premiums while the policy was active.

Determining If a Policy Is Right for You

Here are a few questions you can ask yourself to see if you should consider purchasing term life insurance in the event of your untimely death:

  • Do you have dependents (children) you would like to take care of?
  • Do you have debts (e.g. mortgage) your family would be unable pay?
  • Are there future expenses you would like to provide for (e.g. college tuition)? 

Now, think about the length of time you would need those expenditures to be covered should you pass away. This will give you a good idea of the number of years you need a policy to last. (For related reading, see: How Much Should You Pay in Life Insurance?)

The following tables show the premiums for four 20-year policies in the amounts of $500,000, $750,000, $1,000,000 and $1,250,000, for two healthy, non-smoking males aged 35 and 45 years old, respectively.*

Start Protecting Your Loved Ones Now

Term life insurance can be an inexpensive way of safe-guarding your family’s well-being; if you have beneficiaries, the sooner you purchase life insurance the better. Lock in lower premiums while you’re young. The figures above are not exact; they could go up or down depending on your health and medical history, and policies are usually less for women. But they are a good starting point for anyone considering life insurance. 

(For more from this author, see: 3 Financial Planning Steps for New Families.)


*Quotes generated by Vital Quote

Disclosure: Securities offered through Commonwealth Financial Network, Member FINRA/SIPC. Clearfront Advisory LLC. 157 Columbus Ave., Suite 437 New York, NY 10023. 646-779-9811.