LIFE INSURANCE
Term Life Insurance
Term Life Insurance
Term Life Insurance provides a specific benefit at the insured's death to the policy's beneficiary. These policies usually do not accumulate cash value.
Characteristics
- Rates are generally guaranteed and level for terms of 5 to 30 years.
- Coverage is generally simple and cost effective for basic financial protection.
- Most policies can be converted to permanent coverage.
- Conversion features vary and have different restrictions:
- Premium credit may be offered at conversion.
- Conversion may only be available during the level premium period.
- Conversion may only be to a specific permanent policy.
It’s important to match your need with the type of Life Insurance coverage. Some general considerations:
- Why are you purchasing the coverage?
- Replacement of income
- Pay off debt
- Fund for children's education
- Fund for beneficiary's retirement
- Business Buy/Sell Agreement
- Estate Creation
- How much coverage do you need?
- One simple calculation usually is 7-10 times your current income.
- Another simple calculation is to take the income needed from a lump sum of money given a particular rate of return. For example, if you need $80,000 annual income and expect an 8 percent rate of return on your investment, you would need a $1 million term policy. ($80,000 / .08 = $1 million)
- PFSI can also run a needs-analysis for your specific situation.
- How long do you need the coverage? 10, 15, 20, 30 years, or longer?
- Will you need coverage after the fixed term? If so, how much?
- What are the financial ratings of the carrier?
- How competitive are the permanent policies that the term can be converted to?
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