In our day-to-day lives, we encounter many uncertainties. However, death is perhaps the biggest uncertainty everyone has to face. In some cases, we find ourselves mourning a family member or a close family friend after they depart from this life. More often than not, family members are left with huge bills to cater to after losing a loved one. Sometimes the bereaved are left struggling to make ends meet! The good thing is that in such cases, life insurance steps in to assist.
Term life insurance is a coverage policy that covers the insured for a specific period. If one passes when the policy is still in effect, a death benefit will be paid to the policy holder’s family. It is one of the various types of life insurance available, alongside universal and whole life insurance. With this having been said, here are a few advantages of having term life insurance.
1. Greatest Benefit for Lowest Premium Outlay
Term life insurance enables an individual to acquire one of the greatest low-premium payments when they first acquire the policy. However, the insurance premiums increase upon every renewal. As one grows older, the premium increases compared to when one was covered for the first time.
2. Flexibility: A Better Option for Short-Term Needs
A term life policy is a better life insurance alternative for those who need temporary protection, say 10 years or less. Especially if the individual is younger, they don’t spend much on premiums. However, another type of life insurance with better money value could be more appropriate if protection must continue for more than 15 years.
If protection is needed between 10 to 15 years, the best option depends on your situation. Term life insurance is also quite flexible. It is available in 10, 15, 20, and 30-year covers, which you can select based on your needs.
3. Higher Coverage Compared To Traditional Plans
Term life also tends to offer higher coverage compared to other life insurance covers. This enables one’s family to be left with a significant amount of money, which can push them through and avoid financial difficulty in the policy holder’s absence. A total of an endowment policy is about 7 to 10 years of the premium yearly. If one buys 20,000 dollars of the yearly premium of endowment, they get coverage of 200000 dollars. This is why term insurance steps in and reduces the inconvenience of endowment policy; hence it’s beneficial to the survival of one’s family when one has passed on.
4. Death Benefit Proceeds Could Be Tax-Free
When a beneficiary of term life insurance is a living spouse, the cash they receive from the insurance company is exempted from the estate tax charged by the government. In this case, the widower or the widow will benefit from this policy as they can at least financially pick up from where they had left when their life partner was still alive.
This will shield them from giving a certain amount of money to the government. But this benefit does not apply to all participants. In case the beneficiaries of a policy, children, or siblings of the deceased are not shielded from estate taxes, they will fork out a certain amount to the federal government.
5. You Can Use Your Term Life Coverage as Collateral
One can use his or her life insurance cover as collateral or as security for personal loans. Most lenders, e.g., banks, opt to prefer permanent policies because of the money value. In terms of life insurance, one can use it as collateral when seeking a personal loan if they have a good credit risk. The borrowed money is most likely repaid unless he or she dies. This means that with this policy, you can borrow money without the risk of leaving your family in financial disaster when you pass on since it could cover the debt.
6. Preserves Confidentiality
Life insurance matters are personal. They deserve the privacy and confidentiality of the highest order. The term life policy also guarantees absolute confidentiality between the insured and the insurer. Therefore, no information can be revealed to the public about the death benefits, beneficiaries, or who is to receive compensation.
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Finally, the beneficiaries of the insured can be paid without delay. This is because unless the policy holder’s estate is named as a beneficiary, administrative delays can be eliminated. As you can see, term life insurance comes with various advantages. These include flexibility, affordability, simplicity, and tax-free benefits. Especially if you need coverage for a specific amount of time, term life insurance can be the best option for you.
