Consider term life insurance if you're a :
- Arrange a financial lump sum so your family can maintain a similar lifestyle after you're gone.
- Allow your mortgage or other loans to be paid down if one spouse dies.
- Ensure your business will continue by arranging a buy-sell agreement, in which each partner takes out insurance policies on the other to provide money to purchase a deceased partner's shares.
- Create business continuation insurance so that, if a significant partner in the company dies (e.g., the brains behind a software company), you'll have the money to identify and hire a replacement.
- Supply the funds to cover your monthly business overhead until a replacement starts.
How does term life insurance work?
Term life insurance is less expensive than the other types of insurance because it covers a fixed period of time. The odds are that the insured will outlive the policy term. As a result, the insurance company's risk is minimal, resulting in lower premiums for you.
The cost of your term life insurance will increase yearly. An insurance company that insures 10 people for $1000 each will start the premium at $100. If statistics show that one person is likely to die in the coming year, the next year's premium will be $111 ($1000 divided by 9), etc.
If you'd like a guaranteed rate for a longer period of time (10 or more years), insurance companies offer a set rate (based on the average) for that time frame.
Term life insurance is usually offered in 5, 10, 15, and 20 year terms, or to age 65, age 75 or age 100. The longer the period, the more you'll pay. However, it's usually more affordable to buy 20 year coverage than to buy two consecutive 10 year plans.
You can also use your term insurance policy to insure more than one person (multi-life). If you insure your spouse and children under the same policy you'll save money over the cost of several individual policies.