As we grow older, get married, build our own family, and start a business, we come to realize that life insurance is integral in having a sound financial plan.
As someone who recently graduated, it is vital to know how to make your income grow and where to invest it. This is where having a term life insurance could come in handy.
What is term life insurance?
Term life insurance means that the coverage lasts for a predetermined number of years or term.
This type of insurance typically lasts from ten to thirty years or to a certain age. For instance, your policy is payable until you are 70 years old.
It is recommended to get a term policy that lasts 15-20 years, especially if you have a family or loved ones that depend on you. This is the reason term life insurance is also called "pure life insurance."
For one, it is designed only to protect your dependents in case you die prematurely. Second, you can renew your policy.
However, it is most likely to go up with each renewal. Some companies may even require a physical examination before they allow you to renew the policy.
Moreover, the policy gets more expensive when you are older. That's why it is ideal to get yourself insured while you are young and fit.
It may seem too early for someone who recently graduated, but we have listed down five reasons you need a term life insurance:
Smart financial move
Term life insurance is way cheaper than the whole life insurance. Apart from it is easier and simpler to understand; its premiums usually stay the same throughout the term.
This type of insurance covers your hospital expenses and protects you against accidents, death, and disability. This can also be upgraded, converted, and be built up as an investment.
Indeed, this is a smart financial move for starters!
Protects family from debt
Study Now, Pay Later Program is widely typical of college or university students.
This type of loan will usually not cause any pain to your parents or co-signers since they do not need to pay for it. However, if you happen to have a private loan and die while paying this off, this will surely haunt your loved ones while grieving over your death.
With a life term plan, if you die before the term is over, your death benefit will go to your beneficiaries.
Even though your beneficiary is most likely to be a loved one, it could also be legal guardians, your estate, a charity, or a legal trust.
Secures your dependents
More often than not, many graduates have a lot of credit card debt after coming out of college and graduate school, in addition to student debt.
If you have a spouse, ageing parents to care for, or paying a mortgage, it is essential to en that your dependents can be financially self-sufficient. More so, if something goes wrong with you.
To secure your dependents, you may consider getting the extra benefit of live coverage for dependents. This is possible as long as you are within the term of the policy.
Affordable to acquire
Great news! Term life insurance has its price stays fixed when you get a policy.
Younger and healthier clients get policies with lower rates than those who financially support their partners, children, or ageing parents. Higher rates also go to clients who work high-risk jobs or with extreme hobbies.
So if you are self-employed, starting a family, or a recent graduate, it would be best to consider buying term life insurance. Remember, the earlier, the better!
Builds cash value over time
What if the policyholder does not die during the term? All of the premium payments made will be lost.
But this is not always the case. There are insurance companies that enable policyholders to implement a "return of premium.”.
As the policy name implies, the policyholder can get his premium payments back after the term expires while he is still alive. Premiums for return-of-premium term policies are usually higher than standard term policies.
Term life insurance does not build cash value. Thus, it cannot be used as a financial investment or borrowed against.
Nonetheless, there is an option to make your policy convertible. You can change a convertible term policy into a whole life or other permanent policy types.
But what's cool about it is that you no longer need to go through the standard application process.
By now, you have a grasp of what a term life insurance is. It only has one job, which is to replace your income if something unfortunate happens to you.
It is there to provide for your loved ones and not to make them rich.
Now, it is time for you to invest wisely, be secured, and get a life term insurance.
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