Term life insurance is one of the simplest and most affordable types of life insurance. If you’re thinking about getting a term life insurance policy in Michigan, here’s everything you need to know to make the right decision.
What Is Term Life Insurance?
Term life insurance is a type of insurance that includes a temporary policy that requires regular premiums for a specified term. It provides a death benefit only in case of your premature death during that specified term. If you outlive the policy, your funds are forfeit.
How Does Term Life Insurance Work?
When you get a term life insurance policy, your insurance company sets the premiums based on your health, age, gender, and the payout amount.
Some term life insurance companies in Michigan will also ask you whether you smoke or take any medications, what your driving record is, and other questions relevant for setting the premiums.
If you happen to die before the policy expires, the company will provide the payout amount to your beneficiary. That way, they would be able to cover your funeral costs and any remaining debt you may have, such as a mortgage.
There’s no death benefit if there’s no death during the policy term. That’s precisely why this is the most affordable type of life insurance. It’s for a fixed, restricted time and doesn’t come with any savings. It only guarantees a death benefit should you die before your policy expires.
The Benefits of Term Life Insurance
The obvious benefit of term life insurance is securing your family’s financial future if you pass away prematurely. It would replace your income for a while, helping your family pay off the mortgage, raise your kids, pay for higher education, or anything else.
One of the best things about term life insurance is that it’s the most affordable policy. It usually requires much smaller premiums than whole life insurance.
Another good thing is that you can always renew the policy once it expires. Since you would be older, you would be paying higher premiums for the new policy. However, you might not be eligible for the renewal if you’ve become seriously ill in the meantime.
You can also convert the policy into whole life insurance. That would require even higher premiums, especially if you convert it later in life since age is one of the defining factors.
Most insurance companies in Michigan offer term life insurance policies with 10, 20, or 30 years of coverage. However, you can also get short term life insurance, which covers five or fewer years (usually a period of less than a year).
Short term life insurance can be a good idea when you’re traveling or when you think you’ll be in a dangerous situation.
What Is the Difference Between Term and Whole Life Insurance?
Whole life insurance is a more expensive option because it gives you a lifetime coverage. It pays out after your death, as long as the policy is still active, and you’ve provided all the premiums.
It also comes with cash value, which means you can build equity over time and withdraw the funds anytime if you need them. However, that would reduce the cash value and the payout amount, as well as incur interest. Unless you make loans or withdrawals, your cash value will continue growing.
As opposed to term life insurance, the premiums you pay for whole life insurance remain fixed.
Should You Buy a Term Life Policy?
If you need help making the right decision for you and your family, we can help. Melton McFadden Agency is one of the most reputable term life insurance companies in Michigan. We can help you choose the best term life insurance based on your unique needs.
We also offer short term life insurance, as well as whole life insurance policies. If you’re interested in any other types of coverage that we offer, don’t hesitate to reach out.
Contact us today to get a quote or learn more about all our insurance policies in Michigan. We look forward to hearing from you and working together on your better financial future!