Term life insurance is the simplest kind of life cover. You pay a fixed amount for a fixed number of years. If you die during that time, your family gets the payout. If you’re still alive when the term ends, the policy ends too and nothing is paid.
That’s really all there is to it.
How term life insurance works
You pick two things: how much cover you want and for how long. Common terms are 10, 20 or 30 years. The longer the term and the higher the cover, the more you pay.
Your premium usually stays the same during the whole term. So if you buy at 30, you lock in a lower price than if you wait until 45.
Term life vs whole life
Whole life insurance stays with you for your whole life and also builds cash value. It sounds nice, but it costs much more. Term insurance is cheaper because it only covers a set period.
Many financial writers suggest term cover for most families because you can buy a large amount of protection at a low cost. You can then invest the money you save in other places.
Who needs it
You probably need term life insurance if:
- You have kids or a spouse who depends on your income
- You have a home loan or other big debts
- You support your parents
- You run a small business that your family relies on
Who may not need it
If you’re single with no dependents and no debt, you may not need it right now. Same for people who already have enough savings to cover their family for many years.
How much cover should you get
A common rule of thumb is 10 to 15 times your yearly income. It’s not perfect, but it’s a decent start. Then add your debts and future costs like school fees.
What affects the price
- Your age
- Your health
- Whether you smoke
- The amount of cover
- The length of the term
Be honest on the application. If you hide something and the company finds out later, they can reject the claim. That’s the worst time to find out.
Tips before you buy
Compare quotes from at least three companies. Read the exclusions. Check how long the company has been paying claims. A low price means little if the claim process is a headache.
Final word
Term life insurance is not exciting, but it does one job well. It protects the people who depend on you. If that’s you, it’s worth looking into this month, not next year.
