We buy term insurance in case we die. We come up with a number that will replace the income that supports our loved ones. (A million dollar policy can be surprisingly reasonable). The younger and healthier we are, the more affordable term insurance is. And the younger we are, the longer we will need the term insurance. But term only goes 10, 20, 25, 30, or 40 years. So if a young family buys term when the income earners are 25, than they can cover themselves to age 55 or 65. As these income earners age, two things happen. The children, if there are some, over that 30 years, are probably out of the home by then. And they most likely have already attended school by then. So the needs are less. And the income earners are no longer 25, so they typically cost more to insure. Or they may have serious health issues by then making any life insurance unaffordable.
The best situation is that these folks have a permanent life policy, such as a whole or universal policy, in place so they can stay insured at an affordable rate. (More on that later). If not, and they are fairly healthy, a person at the age of 55 or older who’s term policy is expiring can purchase another term policy for 10, 20, 25, or even 30 years, but will probably buy less coverage. But then they will probably need less coverage, too.
In contrast, a family, say one in their 40’s, with the same young children have the same needs, but since they are starting out later they will have to cover themselves into their 70th year. It is going to cost them a little more than the young family, but surprisingly again, not much more.
The point of term is to have a large enough benefit for unforeseen events when an individual’s or family’s needs rely on replacement of steady income.
Individuals are considered families, too. They may not have the traditional obligations that those with children have, but they may want to leave a legacy to a family member, an organization, or a college. Large term policies will cover those obligations richly, and whole or universal policies will ensure a legacy after death.
So we buy term insurance in case we die, and we buy whole life or universal life for when we die. Again, the younger we are when we buy it, the more affordable it is. Since permanent policies last an entire lifetime, they can be purchased for children and increased over time. The best, I think, strategy is to have a whole or universal life policy to ensure coverage throughout life, combined with a term policy to cover the years when expenses, such as mortgages, raising children, and college educations are still heavy obligations..
I work with multiple insurance companies. So when I run a quote, I have multiple offers for my clients. Call me at (310) 808-8714 or email me at firstname.lastname@example.org for a quote, or scroll down a little further and get a quote now from one of those preferred carriers.
Here’s the proper definition of term: Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the life insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is typically the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.
Term life insurance can be contrasted to permanent life insurance such as whole life, universal life, and variable universal life, which guarantee coverage at fixed premiums for the lifetime of the covered individual unless the policy is allowed to lapse. Term insurance is not generally used for estate planning needs or charitable giving strategies but is used for pure income replacement needs for an individual. Term insurance functions in a manner similar to most other types of insurance in that it satisfies claims against what is insured if the premiums are up to date and the contract has not expired and does not provide for a return of premium dollars if no claims are filed.
– from Wikipedia