So, now that you’ve determined to pursue life insurance, what type of life insurance do you get?
The most common is term insurance. Think of them like insurance rentals: The insurance, and the payment, only lasts as long as the agreed upon term. Term plans can come in many variants, from one or five years, all the way to 30! And at the end of the term, the contract is done.
Term life insurance is often considered the cheapest option, especially when looking at lower year plans, because they only cover you for a certain period. The longer they cover you, the higher your chance of death during the term, so the cheapest option when considering types of life insurance would be many short-term life insurance contracts.
Check out part 6 of Question Mark’s series on retirement planning below to learn more!
All life insurance starts with term insurance. And the easy way to describe term insurance is you’re renting a death benefit for a period of time. So much like when you go rent a car, you’re going to give someone some money and then you get to use the car for a period of time.
Life insurance or term insurance works exactly the same way.
I want life insurance for 10 years. I’m going to pay you a premium for those 10 years, and at the end of the 10 years the contract is done, I have no more life insurance. It’s also the cheapest way to buy it.
So, term insurance lasts for a period of time or a term of time, which is where it gets its name. And you can buy term insurance and lengths of one year, five years, ten years all the way up to 30 years. And some even beyond.
For more answers to common retirement planning questions, check out the rest of the Question Mark: Retirement Planning series.