5 Steps to Protect Your Family With Term Life Insurance

With the dramatic decline in stock prices over the past two years, coupled with the implosion of the real estate market, most people are seeking the most cost-effective way to protect their families. In times like these, the virtues of term life insurance shine brightly.

But, if you ask around, many people have no idea how incredibly inexpensive it is to buy term life. Dollar for dollar, there is no other financial product in the world that does what it does at such a low cost. Here are 5 steps you can use to make smart decisions regarding buying life insurance protection for your family.

Step 1. Know what you are buying.

At its most basic level, term life insurance is pure and simple protection with long term guarantees to pay a large sum of money to your beneficiaries if you die. While the financial services industry offers a myriad of other types of insurance contracts that offer many types of important additional benefits, only term policies avoid the costs that these other plans charge.

Step 2. Decide on the amount of insurance you need.

Nearly half of the workers in our country have no life insurance other than what is provided to them through their employer. Typically this is just a token sum of maybe 1 x their annual income.

Finding the right amount of coverage you will need is easy to do using any number of online calculators. Some calculators will simply take your annual income and multiply it by the number of years you desire coverage for to come up with the recommended amount of insurance coverage. Other, more advanced calculators ask more specific questions such as what is your target date for paying off your mortgage or, when do you think your kids will start college, etc. Using these types of variables the calculator can give you a fairly accurate recommended amount of coverage.

Remember, when you die, there is no second chance to buy the right amount of life insurance! Pay attention to this step and your family will be in good shape.

Step 3. Decide on how long you’ll need coverage for.

Ideally, your coverage should not expire before your need does. If, for example, the purpose of the life insurance is to provide coverage for a specific period of your life, such as until your kids finish college, and your youngest child is 5 years old, then the life insurance policy last for at least 20 years.

Keep in mind that you’ll never be as young or as healthy as you are today. It’s always a good idea to lock in the lowest rate for the longest period.

Step 4. Shop around.

We all have a friend or a relative in the insurance business. Often times these well meaning relations work for a single company and can only present a quote from the one company they work for. That my have worked well in a previous time but, the days of buying insurance from your cousin Johnny, or your coworkers’ spouse are long gone. With the internet, you now have the power to compare multiple quotes side by side and select the life insurance coverage that best fits your needs. Let’s face it, you will own this policy for a long time, you’ll want to make sure you are making the wisest use of your money.

Step 5. Understand the key differences of term life insurance policies.

As commonplace as term life insurance policies are, there ARE differences beyond price that should be considered before making your buying decision. By comparing different insurance policies, you can often find a policy with better features, more options, and/or from a company with a stronger financial profile.

Some policy differences to consider are the length of the guarantee period, whether the policy is convertible into a permanent form of coverage like a ‘whole life’ policy, are there options to add coverage for a child or spouse, is there a waiver of the premium in the event of disability, or is there a rider that will return your premium? Understanding these differences is important to choosing the right term life insurance policy.

We’ve all been affected by the economy and one important question to consider is, “If you were to die today, would your family be better off or worse off financially than they were 2 years ago?” Planning to take care of their future needs is more important today than ever before. Properly using term life insurance is one affordable way that you can bring peace of mind back to your family’s financial picture.