Financial Clarity Coaching Blog

Life Insurance: Mini-Series – Term Life (Part 1)

But first…coffee.

As part of our newest mini-series, we’re starting off with something most people scoff at…Life Insurance! While life insurance is important to protect you, your loved ones, & your assets, it’s also important to know the differences in all products. Today we’re talking about Term Life. Term Life works for >80% of the population, but if you are single without any dependents, I’d consider beefing up your disability insurance instead. In this post, I’ll highlight the to reasons to have Term Life with some comparisons to other insurance with pros and cons.

Cost Efficient Options for Married Couples
  • If you are married, you each should have a Term Life policy. This protects both of you in the event of a life changing event.
  • Term Life policies are cost effective. Simply meaning that in many cases you can have a higher death benefit for a fraction of the cost. This ISN’T the case with Whole Life. For example, you can have a Term Life policy that will pay a death benefit of 1 million for a monthly cost as low as $27-$37 a month.
No Cash Value Component
  • Term Life doesn’t contain a ‘cash value’. Cash Value is included with Whole Life policies which I’ll dive into next. Spoiler, that cash value is NOT worth it.
Ages Included and Length of Policies
  • Most Term Life policies are written for a minimum of 10 years to a maximum of 20 years. Some offer a 30 Term too. Most agencies require a minimum death benefit/face amount of $100k.
  • Term Life Insurance can be purchased for ages 18-80. (Some agencies may place an earlier age Max like 65-70). This means that at age 60, you can still have a policy written to cover you.
Classification Risks and Term Life Conversions
  • Your classification risk dictates your monthly or annually cost. If you are a healthy, non-smoking, no existing conditions individual, underwriting will classify you under the ‘preferred’ classification. This typically provides a policy to you less expensive than someone who is not in shape, smokes, or has existing conditions. Agents will default your application as “non-smoker” but underwriting will make the adjustment when all paperwork is complete.
  • Term Life can be converted to a permanent or whole life policy at a later date. This is beneficial strictly as you age.

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