For years some financial experts have suggested the most cost effective way to protect your family is through buying term life insurance – and investing the difference.
Previous articles on my site have debated this but for us – term life insurance works.
Here’s a list of key reasons why term life insurance works in our house:
- It’s simple to understand. You have premiums, you have a term for your premiums and you get coverage.
- Our policy is renewable and convertible. This means our coverage can be renewed and/or converted to a permanent plan when the term is up without a medical exam.
- Our premiums are low.
- Our premiums are fixed. They won’t go up for the length of our term.
- We hope to self-insure eventually when all debts are paid off and assets can cover the following:
- Income replacement from a prolonged job loss
- Money for emergencies
- “Final” expenses
Life insurance benefits are tax-free. So with term life insurance, while you are paying your modest premiums should something catastrophic occur to you, your designated beneficiaries will receive a tax-free, lump-sum death benefit.
Life insurance is just one part of disaster-proofing your life – something we take seriously. With a new year now underway, I think it’s a great time to revisit what you’re doing to disaster-proof your life and stop-overthinking your money decisions. We’ve already reviewed our life insurance considerations for 2017 and we’re good. We then went on to post these 2017 financial goals.
OK, how can you get the best term life insurance for you and your family?
Here are some tips and considerations after talking to LifeInsuranceDirect:
- Itemize your needs. This means taking an inventory of all existing debt obligations and the need for income replacement to last at least a couple of years. Add it up and that’s likely the minimum amount of coverage you need.
- Don’t be fooled by low rates. While low rates are advertised and legit by many brokerages, some sites are promoting optimal rates. Be mindful these optimal rates may not be what you qualify for.
- Consider paying premiums annually. Paying premiums annually might not be ideal for your monthly budget but it will save you money over monthly payments.
- Ensure term is right for you. Term life insurance is relatively simple to understand but there are also many other life insurance products to consider. Each type of life insurance has pros and cons. Ultimately the best choice is the one that’s right for you.
- Don’t set it and forget it. Make sure in the fine print (that you should read carefully by the way) that your term policy can be renewed for one or more terms, even if your health status has changed. Ask before you buy what the premiums might be if you renew the policy. Also consider asking if you will lose the right to renew the policy any at point in time.
There are many more considerations but these are starters for you…
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Canadians can instantly calculate their potential coverage with a few term life insurance options (Term 10, Term 20 and Term 30) here:
At the end of the day life insurance is not for you. It’s for your loved ones. If you don’t already look at life insurance this way – consider this: life insurance is about transferring risk away from you to someone else. It’s a risk management approach. It’s designed to protect the financial security of those you love should a catastrophic event unfortunately occur. I encourage you to consider your needs and choose wisely.
All opinions expressed are my own.