How Does Term Life Insurance Work

What is Term Life Insurance?

Term life insurance is a type of life insurance that helps protect you for a period of time or a term. Terms typically last anywhere from 5 to 30 years but can last longer in some cases. The length of your term is up to you, so you can get life insurance coverage for as few or as many years as you need. During the time you are covered by your policy, your payment amounts don’t change and you are insured for the amount that you purchase.

How Can You Use Term Life Insurance

The following steps break down how term life insurance works – from purchasing a policy to using it.

1. Calculate your life insurance needs.
   • Figuring out how much life insurance you need isn’t as challenging as it may seem. You can use a free life insurance calculator to quickly determine your life insurance needs, or you can talk to a trusted agent/producer.
   • Once you have a better understanding of your needs, you can weigh your options to determine if term life insurance is the best choice for you. Remember that your needs change over time, so a term life insurance policy may only be needed until you reach retirement age when your financial obligations typically decrease.
2. Apply
   • You may need a few things to apply for a life insurance policy, so have these things on hand to make the process as easy as possible.
   • Driver’s license or ID
   • Proof of income
   • Proof of residence, like a utility bill or a rent receipt
   • Think about who you want to receive the benefits in the event of your death. This is called your beneficiary.
   • Contact an agent/producer or complete an online application to apply for a term life insurance policy.
   • After you submit your application, the insurance company reviews your previous insurance and pharmaceutical history to help determine your eligibility. Once you meet all of the eligibility requirements, you are issued your policy.
3. Enjoy some peace of mind
   • Your life insurance helps offer you financial protection and some peace of mind for your specified term. If your policy remains active and your death occurs during that period, your family receives the amount listed in the policy to help cover their financial needs.
   • If you want to extend your life insurance coverage past the term, you can renew your term life insurance policy, but your health and eligibility will be re-evaluated at that time. You will begin paying for your policy again, and the rates could have changed since you purchased your first term.

Is Term Life Right for You?

Term life insurance may be a good option for you if:

• You need affordable life insurance coverage
  • Term life insurance is often less expensive than other types of life insurance. If you don’t need the unique benefits of a permanent or whole life policy, a term life policy could meet your needs.
• You want additional coverage
  • Are you raising children? Are you staying home with your children until they start school? Are you the primary or sole income for your family? A term life policy for the amount of years you are raising your child could be an added financial security blanket. In the event of your death, the policy could cover the child care costs or replace your lost income.
• Your family has bills that could not be paid without you
  • Do you have bills, like a car payment or mortgage, that your loved ones could not afford without your income? If so, a term life policy that matches with the number of years you’ll be paying those bills might make sense.

There isn’t one product or solution that meets every need, so consider your unique circumstances when looking for coverage. If term life insurance doesn’t seem to meet your needs, that’s ok. Maybe a whole life insurance policy could be a better solution. Or a combination of both may be needed to meet your goals of financial security.

Term life insurance may not be right for you if you are:

• Looking for coverage over the course of your whole life.
• Are interested in a policy that can build cash value.

Financial peace of mind and protection for those you love most is what is most important. So, keep that in mind when choosing a life insurance policy.

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