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Personal Finance Basics: Term Life Insurance

When it comes to the most fundamental steps of personal finance, term life insurance is one of the essentials. This is especially true for young families who are starting the personal finance evaluation process. Term life insurance is a very valuable tool for those families who need financial protection at a reasonable cost. All other protection options come at a higher rate, which is just not an option for young families, just getting started, making term life insurance is one of the most widely utilized forms of insurance available today.

Term life insurance, as the name implies is insurance that protects an individual's life for a specific period of time, or term. When compared to its traditional whole life counterpart, term life insurance protection can be purchased for fractions of what it would cost to fund a permanent insurance policy. Whole life insurance, or permanent insurance, is often more expensive than term life insurance because it is not sad for a specific term, and lasts as long as the policy is enforced. Permanent life insurance certainly has its benefits, but when it comes to buying life insurance to protect your family at a substantial discount there is no beating term life insurance.

Depending on your needs, term insurance can be purchased so that it is in force as long as you need it. Term life insurance is commonly purchased for guaranteed periods of 10, 20, or 30 year terms. This provides for much flexibility. You may want to have insurance in place for at least 30 years, ensuring that your kids are grown and out of the house before expiration. You may want to provide income for a surviving spouse, should something happen to you. Term life insurance provides that flexibility, and does so on the cheap.

Term life insurance premiums are determined by a number of things. For obvious reasons, your health and your age are major factors in determining your insurability. The farther you go out in years, also plays a role in the insurance costs. If you're a relatively healthy 25-year-old, and just need a life insurance for a period of 10 years, term life insurance is very inexpensive. If you're a 55 years old, and want a policy that will ensure you for another 20 years, the costs will be more expensive, but still reasonable when compared to whole life. Regardless of your specific situation, term life insurance is often the answer, should you need insurance for a specific term.

One of the biggest objections that we hear in the insurance industry is that term insurance premiums are often wasted. The reason being, most individuals feel like they will outlive their 20 or 30 year policies. And many of them will, so they want an alternative. The downside to term life insurance is that when the term is over the insurance policy expires worthless. To answer this objection, the insurance industry has introduced a new product called return of premium life insurance. This product commonly comes in the form of a rider, which insurers that if you don't die you'll receive all your premiums back at the end your policy. This win-win situation comes at a cost, however, many return of premium policies can add 60%, to premium costs. For some, the protection of family and premium dollars, if you're fortunate enough to live are worth the extra cost. Most of the time we recommend a street term life insurance policy, for those looking for the lowest cost.

For young families learning about personal finances, life insurance planning should be at the forefront. It offers the protection you and your family need most, and it does so at a great price. It pays to go with an independent insurance agent or to search online, in order the most attractive term life insurance rates. Since there is no tie to any one specific insurance company, they can compare a number of insurance companies to find you the best rate.

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