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Is Term Life Insurance Good For You?

Yes.  End of commentary.

If you want to know why I think that you can read on…

To help clarify things it helps to know a bit about how the premiums are figured out for your life insurance policy. It should not come as a surprise that every year older you get life insurance has a higher premium. For permanent life insurance products you pay more than you need to today to cover the actual insurance cost so that later on in your life you can pay less than would be needed, kind of like front-loading the policy with cash to offset higher costs later. This isn’t the case for term life insurance. With a term life insurance policy you are going to pay what the actual cost of insurance is for the duration of the term and then it will renew and the premium will go up because the cost of the underlying insurance has gone up as well.

Term life insurance is a great product that has helped many people solve their life insurance need. When you are building your term life insurance coverage it is important to understand that what you are trying to cover with term life insurance should be temporary in nature (think mortgages). Term life insurance’s role is to cover the large expenses that will go away as time passes.  This is why we would use it for covering a mortgage or to help provide supplemental income when kids are young. As time passes the need associated with these things goes down so you can reduce or eliminate the coverage without having paid any extra into it over early on in the contract. 

We always recommend that you should try to match the length of the term life insurance policy with the need that you are covering if you can. Don’t cover an expense that will be gone in 8 years with a 20 year term plan, and the reverse is true as well. If you have a 25 year mortgage look at a 20 or 25 year term to avoid a renewal premium while the coverage is still needed. This will save significant amounts of premium over the duration of the policy.

One other key aspect to remember is that your term life insurance policy will have an expiry date built in. It may cover you until age 85 but not beyond that point. Do not rely on it to pay for your funeral. When you use it properly as part of your overall insurance plan, term life insurance is a great choice to get the protection you need without breaking the bank.

If you are still unsure or have questions, the best course of action is to speak with one of our experienced life insurance brokers to help determine what is right for you.

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