Term Life Insurance In Brooklyn: The Simple Truth
The simple truth about life is that it is inherently unpredictable.
However, the question is: are you and your family financially protected?
For the Ellis family, a quiet Sunday morning was shattered in an instant.
As usual, Dave started his morning with a warm cup of coffee and the news playing in the background. But just hours later, on his drive to work, tragedy struck. A sudden accident changed everything and his family’s life would never be the same.
Dave’s wife, a stay at home mom, was distraught. How was she going to afford funeral costs, the mortgage and bills, and how was she going to put her kids through college? Her mind ran endlessly and she couldn’t sleep. Until she reached out Dave’s insurance broker.
Ten years ago, Dave had taken out a one-million-dollar term life insurance policy. While this policy couldn’t bring him back, it provided the family with the support to meet their basic needs, keep their house, and secure their children’s education.
That one decision brought the Ellis family something invaluable: peace.
Life insurance takes care of the people who depend on you.
There are two types of Life Insurance:
Term Life Insurance
Whole or Permanent Life Insurance
In this blog, we will mainly focus on 'Term Life Insurance.'
Click this link to learn more about the differences between term and whole life insurance.
Life is full of unexpected surprises. Be ready!
Term Life Insurance
The Basics
To break it down, term life insurance is the most affordable type of life insurance, where you purchase the policy for a specific period, known as a term.
That’s why it is known as “Term” life insurance.
It’s that simple.
Usually, the term ranges from 10, 20 or even more than 30 years. The decision of how long you want your term to last is solely based on your financial status.
Think of term life insurance as a contract.
It is a simple agreement between you and the insurance company. During this term, you pay a consistent monthly or annual payment (premium) to keep the policy active.
If you (the insured) pass away while the policy is active, your beneficiaries (loved ones) receive a tax-free payout known as a death benefit. It's designed to replace your income and support your family.
Another important thing to know about term life insurance is that it doesn’t build cash value, unlike whole life insurance. Its sole purpose is to provide temporary financial protection to you and your family in the most cost-effective way. If the term ends, the coverage expires with no cash paid out.
To make the concept simple, let me give you an example,
Say, you bought a 30-year term life policy at age 20 for $500,000 coverage.
If you pass away at the age of 40, your family gets $500,000.
If you live past 50, the policy ends, and no money is paid out.
Benefits of Term Life Insurance
Term life insurance may not be a major concern for most people, but planning for the future can be one of the smartest decisions you make.
Besides being simple to understand, the benefits go far beyond.
1. Affordability
One of the most significant advantages of term life insurance is its affordability. Term life insurance protects you for a period based on your chosen term length. Additionally, since it doesn’t build cash value, the premiums tend to be significantly lower than those of whole or permanent life insurance.
2. High Coverage Amounts
Term life insurance allows you to secure a huge coverage amount relative to the premiums you pay. Whether it’s to cover debts, pay off a mortgage, or fund your children’s education, term life insurance offers long-term financial stability for your loved ones.
For instance, a healthy 25-year-old can obtain over $300,000 in coverage for just $15 a month.
3. Flexibility
You have the flexibility to choose a term length that aligns with your financial situation and personal needs. If you have young children, selecting a policy of 20 years or more can ensure they are protected until they reach adulthood.
4. Comfort
There is a sense of comfort in knowing that your family will not face financial hardship if something happens to you. You can rest easy, knowing they will be protected from financial burdens.
5. Simplicity
The simplicity of term life insurance is what makes it appealing to many families. It is easy to understand and manage, especially for first-time buyers.
Term Life Insurance Doesn’t Have to Be Complicated
How to Get Term Life Insurance
Now that you’ve understood what term life insurance is, you also need to know how to obtain the right insurance policy for you and your family.
While getting term life insurance may seem intimidating, the process is straightforward and quicker than most people expect.
There are a few key points to keep in mind when selecting your policy.
Here's a step-by-step guide:
1. Pick a reputable company.
The first step to take it figure out which insurance company is the best fit for you.
There are two types of insurance companies:
Stock Company
Mutual Company
- Stock Life Insurance Companies are owned by shareholders, not by the people who buy the insurance. Their main goal is to make profits for their shareholders and earn higher investor returns. This means that they don’t share their profits with you; however, the prices are reasonable and affordable.
- Mutual Life Insurance Companies are owned by policyholders (you). This means any profits the company makes may be returned to you. Unlike stock life insurance companies, mutual companies care about their customers than shareholders. Not only are you a customer, but a part-owner of the company.
2. Compare Quotes
Insurance companies use basic information, such as your age, gender, and health habits, to provide an estimate of your premium.
However, these estimates can vary between companies, so it's essential to compare costs from different insurance providers based on your profile.
Understanding this process can help you avoid overpaying for coverage and find a policy that meets your specific financial needs (debt repayment or funding a child's education).
3. Fill Out Your Application
After you've reviewed quotes and decided which insurance company you'd like to work with, you'll need to complete an application.
Common questions on the application include:
Your age and income
Health history (some applications may require a medical exam, while others may not)
Lifestyle choices
Following your application submission, the insurance company will then decide to determine the risk of insuring you.
For instance, if you smoke heavily or work as a deep-sea commercial fisherman, you may face higher premium rates.
Smokers are considered at higher risk due to long-term health issues.
Deep-sea fishermen have one of the highest fatality rates of any job in the world.
Life insurance companies understand that the odds of providing death benefits to beneficiaries are high, leading them to adjust premiums.
4. Figure Out How Much Coverage You Need
To determine how much coverage you need, you need to ask yourself:
- Who am I trying to protect?
- How much coverage would they need if I were no longer here?
- Do I have any debt that needs to be settled?
- Will my children need funds for their college education?
A common rule of thumb is to aim for coverage that is 10–12 times your annual income, plus any significant debts.
For example, if you earn $80,000 per year, you should consider coverage between $800,000 and $960,000.
And if you have a $100,000 debt, this amount should also be added to your total coverage value.
5. Choose a Term Length
When selecting your term length, consider how long your family members will rely on you.
10 to 15 years: This term is suitable for covering short-term needs or for older individuals. If your children are grown or you don’t have children, the term allows you time to become self-insured and provide for your spouse should something happen to you.
20 to 30 years: This option offers long-term protection for those with young, dependent children. A term of 20 to 30 years ensures you have enough coverage to support your children until they reach adulthood.
Keep in mind that longer terms typically result in higher premiums, as the risk to the insurer increases over time.
6. Name Your Beneficiaries
Now it's time to mention your beneficiaries; these will be the people who’ll receive the benefits if you pass away. This is an important step in ensuring that your loved ones are taken care of.
7. Get Approved and Start Your Coverage
Once the insurance company reviews your application, you will either receive an approval, a modified offer, or a decline (which is rare)
If approved, your policy will become active for the term you selected, protecting your family.
Term Life Insurance: Common Questions Answered
Does Term life insurance cost too much? Is it really worth it?
Yes, it absolutely is, especially when you have people depending on your income.
You might assume that life insurance is out of your budget, however term life insurance is most people’s top choice due to its affordability and simplicity (particularly young and healthy people).
Most importantly, it offers you peace knowing that your family won’t be financially burdened if the unexpected happens.
Can I cancel my term life insurance policy at any time?
Yes, you can cancel it whenever you want without penalty. However, it’s essential to understand that once you cancel your policy, you lose your coverage, and it cannot be reinstated.
I’m single with no kids, do I still need life insurance?
Even if you don’t have anyone depending on your income right now, term life insurance can still be valuable. It can cover your debts or even funeral costs, so your family won’t have to worry about paying for them.
If you mention your parents as your beneficiary, it could provide them with coverage to help them with their needs after retirement.
Can I take out a loan against my term life insurance policy?
No, you cannot take a loan out against term life insurance as it has no cash value. Taking out loans is only possible with permanent life insurance policies, such as whole life insurance.
Term life insurance is designed solely for protection, not savings. This means your cash does not grow over time, so you have nothing to borrow from. You only receive a payout if something happens to you before your term ends. Once the term expires, the policy is no longer valid, and there’s nothing to borrow against.
Is term life insurance taxable?
No, the death benefit that your beneficiaries receive is tax-free in most cases.
Are employer-provided life insurance benefits enough?
Usually not. While employer-provided life insurance or group term life insurance is a great option and often free, it’s rarely enough to fully protect your family.
Most employers provide 1–2 times your annual salary as a death benefit.
It’s important to aim for coverage that is 10 to 12 times your income. So, while employer-provided insurance can help, you may also want to consider having term life insurance in addition to it.
Keep in mind that if you change jobs or get laid off, you lose your coverage, which is risky, especially as you get older.
What disqualifies you from getting life insurance?
Severe health issues, employment in risky jobs, a criminal history, or recent bankruptcy may result in denial or higher rates.
However, that’s not to discourage you; there are several companies that offer insurance policies even to those with severe health issues.
Life Insurance Isn’t For You, It’s For You Loved Ones
Let’s face it, life is filled with challenges, surprises, and the unexpected.
Getting term life insurance isn’t about expecting the worst, but to plan for the unexpected. It’s a safety net to protect your loved ones.
Protecting your family shouldn’t be complicated, but it should definitely be done.
So, go ahead, get that coverage and sleep a little easier.
If you’d like to learn more about term life insurance or want to speak with someone about your options, simply fill out the form below.
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