Like all life insurance products, term life policies are designed to ensure your beneficiaries are financially supported in the event of your passing. But unlike a whole policy, which lasts a lifetime, term life insurance only pays out if your death occurs during the term limit.
When weighing your options, why choose term? We debunk a few common misconceptions to help you decide. AAA Insurance Life and Annuity Manager Timothy Boyle helps us sort the facts from fiction.
Myth: It’s not worth paying for something that is going to expire.
Truth: Term life insurance is a simple way to make sure your family is covered from short- and long-term financial debts. It is affordable and provides a large amount of coverage for a small price. You choose the amount of coverage and the term length that fits your budget and needs.
Term policies are usually sold as 10, 15, 20, 25 and 30 years. Of course, the longer the term, the higher your premium will be because your risk increases with age. This is why it’s a good idea to invest in a life insurance policy as early as you can.
If you need help deciding on a term length, consider factors such as the length of your mortgage, how long your children will be dependent on your income and how far you have until retirement.
If you outlive the term, you have the option to update and extend your term policy or convert to a whole policy.
Myth: The life insurance policy provided by my job is enough.
Truth: Most employers offer group life insurance – usually the amount of your salary – for free or at a low monthly cost. This is a good supplemental insurance to have but can rarely stand on its own. Group term insurance provided by your job also does not follow you if you have to leave. So, if you get sick and have to stop working, you would lose your life insurance when you need it most.
As with all types of insurance, it’s not always sufficient to simply have a life insurance policy (or several). Your policy should provide enough coverage to ensure that your loved ones are financially stable. While more than 50% of Americans are covered by some type of life insurance, according to the Insurance Information Institute, many are underinsured, meaning their death benefit would not cover the expenses they leave behind like a mortgage, college, car and credit cards.
Myth: Term life insurance just covers funeral expenses.
Truth: Life insurance is for the living, not the dead. While a policy can be used for final expenses, most frequently, term products are used to cover large debts like a mortgage or college tuitions. AAA also offers several term products that can pay you back every cent paid in during the duration of the policy. Contact a AAA Insurance agent to learn more.
Myth: Life insurance is only for older people or people with kids.
Truth: A life insurance policy can be beneficial for anyone that has someone to protect. Term life insurance policies are based on a fixed premium, so the younger you can secure a policy, the better.
Even if you don’t have any children or dependents yet, investing in a policy while young can protect the lifestyle and income of your loved ones down the road for less than if you were to wait.
In addition to death benefits, a term policy can also help you plan for your living future when converted to a permanent policy. Whole policies have cash value and some can be borrowed against and used to build wealth, support yourself tax-free during retirement and protect yourself if you become disabled or injured.
Once you lock in your price, you can still make changes to your policy.
Myth: Term life insurance is too expensive for not enough coverage.
Truth: Term life insurance is the cheapest form of life insurance. Always try to get as much life insurance as you can comfortably afford each month and consider increasing coverage later. It can’t be stressed enough that it is easier and cheaper to get life insurance when you’re young and healthy.
Your health plays a large role in determining how much your life insurance premium will be. Certain preexisting conditions, typically long-term and chronic, could raise your rate or affect your eligibility for a life insurance policy.
If you have health issues that prevent you from getting a traditional term life insurance policy, AAA offers no medical exam life insurance policies for its members, which are great for covering final expenses like burial and funeral costs. Speak to one of our insurance agents for more information on how you can get the best rate.
Investing in life insurance should leave you with a feeling of confidence, not confusion. Now that you have the facts, you can choose a plan with certainty, knowing your family will be well-protected no matter what.
Did you believe any of these term life insurance myths? How young did you start your life insurance policy? Tell us in the comments.
Learn more about your life insurance options with AAA Insurance.