At a certain point in your life, you realize just how financially burdened your loved ones would be if you were to pass away. That’s typically when individuals start exploring life insurance as a way to help provide for them if the unthinkable were to happen.
But the array of options out there can be dizzying. If you’re looking for something straightforward, term life insurance is probably the simplest way to go.
Here’s how it works: You pay yearly premiums (you can pay quarterly or monthly too, if you prefer) for a set number of years (the term). If you die during that time frame, your insurance company will pay out a lump sum, also known as the death benefit, to your beneficiaries. If you don’t die, the policy goes away once the term is over — you don’t have to pay your premiums anymore, but your beneficiaries are also no longer going to get a death benefit.
Term life insurance is typically cheaper than the other main type of life insurance: permanent. That’s because permanent life insurance will pay a death benefit no matter when you die, and it accumulates cash value that you can access during your lifetime. Term doesn’t do that.
Term life insurance is typically best to help cover a specific need that will end. For instance, if you have children, you might want enough money to take care of them and pay for things like college or maybe even a wedding someday if you die while they are young. If someone co-signed or could be on the hook for your private student loans, you may want coverage while you’re paying the lenders back so that person won’t be on the hook
