Stretch Your Budget by Looking at Term Insurance
We speak with many clients and prospects on a weekly basis. Most of them understand the importance and value that a life insurance policy has. If a premature death occurs, a lump sum is paid out tax-free to the beneficiary to use the money on whatever they want, including: pay off debts, provide an income for the family, or fund post-secondary education for children.
What concerns most people is the cost of the life insurance. I’ve heard people complain that the reason they don’t have life insurance is because they don’t want to pay $70/month for premiums. That’s when I have to pause their thought process and explain that there are different types of insurance and also explain that there are much cheaper policies available to them.
What is term insurance?
The easiest way to explain term insurance is to compare it to paying rent. While you are paying the monthly premium, the insurance company will pay a death benefit if you die. Terms can range from 10 to 30 years up to age 100 and when the term is up, you have a few options to choose from in terms of continuing coverage or ending it. Much like renting a house, there is no equity in the policy. Terms such as cash surrender value, policy loan value, or paid up additions, are not applicable to term insurance. You are paying for pure coverage with no bells and whistles attached. An ideal client for term insurance is someone (or family) who is living on a tight budget, but understands the importance of life insurance, and has the need for coverage.
Simply put, term insurance is the cheapest form of insurance you can purchase.
When the initial term is over, you have a few options.
- You can renew the policy, but the premiums will be higher because you are older at renewal than the initial purchase.
- At any time during the term, you can convert some of the insurance to permanent coverage.
- You can choose not to renew and end the coverage.
Don’t worry – we’ll gladly walk you through choosing which option best fits your situation.
Summary
The bottom line is this: term insurance is cheap. In fact, the younger and healthier you are, the cheaper it is. This type of coverage is best for those on a tight budget or those who are covering a debt for a specific time period and who want pure insurance coverage with no investment side account.
Disclaimer: This blog is not intended to recommend that term insurance is the right product for you, but merely to explain exactly what it is. Please contact us for a complete analysis of your situation and we can work together from there – (705) 733 9385.