Learn more about Term Life Insurance
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Every family needs to have life insurance, especially if you have a mortgage, loans, etc. This ensures your family has an additional income for financial hardship after the death of the policyholder. If you have kids, this may benefit to help pay for college. At the end of a term, the policyholder has the option to renew, convert to permanent, or terminate the policy. The premium is based on your age, health, and more.
Types of Term Life Insurance
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10 year term
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15 year term
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20 year term
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25 year term
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30 year term
According to III, 20-year level term life insurance policies are the most popular.
Types of Term Life Insurance
Level Term
Level Term Life Insurance is the most common and affordable option for term life. You may have questions like, how do I know if level term life is right for me or what is level term life? We're here to educate and answer any questions you may have. Level stands for the amount of premium you pay monthly/annually. This means that you will pay the same price throughout the term of the policy. Typically, the tax-free (according to IRS) lump sum (death benefit) to the beneficiary at the death of the policyholder stays the same or level.
Yearly Renewable Term (YRT)
Yearly Renewable Term Life Insurance is a great temporary option. Premiums tend to start cheaper because you are only covered for a year term but tend to be more expensive in the long run the older and less healthy you are. This is not always the best option because if a serious illness were to occur the next term premium would be expensive and possibly uninsurable. If you are young and healthy, level term policies are your best option because it is relatively cheap and you are locked in for 20 or 30 years.
Decreasing Term
Decreasing Term is a great option to protect your family if you have a mortgage or debt. It allows your family to have stability in the event of the death of the policyholder. Decreasing term policies are normally less expensive than level term policies because the death benefit over time decreases. The premiums stay the same every year while the death benefit decreases.
How much Life Insurance do I need?
If something were to happen today, what would you want financially for your kid's education, mortgage, or debt? We recommend using the DIME method to figure out an appropriate amount of death benefit to your beneficiaries. Nerdwallet states the DIME method stands for debt, income, mortgage, and education. It is important to realize every situation is different, so what works for someone else may not work for your family. For example, a single parent may need more coverage than married parents. Maybe there is only one parent working in the household, while the other is taking care of three kids. Please follow the example below to help you figure out the right life insurance coverage for your family.
DIME method
Debt:
$10,000
Income replacement:
$50,000 x 7 = $350,000
Mortgage:
$170,000
Lets say you and your spouse have a joint loan of $10,000 and would like for this loan to be paid off in the event of a death. The average credit card debt in South Carolina is $5,801, says Consolidated Credit.
According to DataUSA, the median household income in South Carolina is $52,306. Then, you should multiply your income by however long it would take for financial stability again. We typically recommend multiplying your annual income by 5-10 times, depending on your needs.
The medium property value in South Carolina is $170,800, says DataUSA. Paying off a mortgage in the event of a death will provide security to your family.
Education:
$8,485 x 4 = $33,940
College Tuition Compare says the South Carolina's average in-state tuition is $8,485 and $18,152 for out-of-state tuition. Multiply this by four to five years and that is a pretty hefty expense for one parent/child to pay.
Total: $563,940
Please call an agent today to find out how much a life insurance policy is for your family.
Renew, Convert, or Decline
At the end of your term life insurance policy, you have the option to renew, convert to permanent, go without coverage, or find a new life insurance policy. When renewing your term life insurance policy, the premiums will change, and you may have to go through the underwriting process and get a medical exam again. Most policies have a guaranteed renewability feature that allows you to extend the term without going through the the underwriting and medical exam process. This can be great especially if your heath has declined as you have aged. For example, it can be hard finding coverage at a good price if diagnosed with illness.
When converting a term into permanent life insurance, some policies may contain or allow you to purchase a rider (add-on) to guarantee insurability. This allows you to convert your term to a permanent life option at a higher premium without having to get a medical exam.
You also have the option to decline the renewal and decide not convert your policy. You may not need any life insurance at all since your kids are all financially independent or want to switch insurance companies.