Term Life Insurance – When should I buy it?

Term life insurance is the most basic and cost effective form of life insurance.  Here is a short example of how it works;

*Example: James and Brittany are married with a child.  They decide to each buy a policy on themselves making the other the beneficiary, but let’s focus on Brittany’s policy.  Brittany is a healthy, 32 year old, non-smoking female and for $36/month she will own a $1,000,000 policy on herself with a 20 year term.  In short, if Brittany suddenly passes away within the next 20 years then James will receive a $1,000,000 tax-free death benefit that he can use to pay for the funeral, lost income, child expenses, any debt payments they owe or anything else.  The amount and the length of the term can be easily adjusted.

 

So when should I consider buying Term Life Insurance?  Here are a few reasons to consider it.

  • Do you have a child or planning one?  This is the main reason for people buying term life insurance.  If one parent suddenly passes it allows the surviving spouse to continue to care for the child, pay the bills, and give them the appropriate amount of time to mourn the loss without having a financial burden to handle.

  • Work insurance is not sufficient – Oftentimes people tell me that they have life insurance through work so they are covered.  The problem with this is that the coverage is normally for a small amount such as $50,000.  Check with your employer to see how much coverage you have.

  • Replacing an income – Even if there is no child in the picture, replacing a lost income can have devastating consequences to someone depending on it.  Normally that person is a non-working spouse, but it can also be a special needs family member or someone else.

  • Do you own a home with a spouse or other person?  How would you pay for the mortgage or other debt if you lost an income?  If you don’t have an answer then you know what you need to do…

  • Do you own a business with another person?  If one business partner dies, then what?  Often times a simple cross purchase agreement can be funded with term life insurance to alleviate any of these issues.  If you can’t buy out their partner then the partner’s beneficiary will take ownership which can have serious problems for any business. 

 

Life insurance is not a one size fits all situation so make sure you reach out to a financial professional.  If you don’t have one then we would be more than happy to help you find the answer you are looking for. 

 

*This is a hypothetical example using quotes from a search engine using a 32 year old, non-smoking, female to find a 20 year $1,000,000 policy. 

Securities and advisory services offered through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency LLC), member FINRASIPC,a broker/dealer and a registered investment adviser. Cetera is under separate ownership from any other named entity. CA Insurance License# 0I59024.

 

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