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What Income and Age Group Purchases Term Life Insurance?
Life insurance is an important part of an overall financial plan for many individuals and families. A type of life insurance called term life insurance might be part of that plan, although not perhaps the right insurance product for every situation. The decision to purchase term life insurance depends on various factors unique to each person and family, including their current and future financial needs if the breadwinner of the family should meet an untimely demise.
What is Term Life Insurance?
Term life insurance is a type of insurance product that provides the policyholder with financial protection for a specific period of time, or a term. The product was developed in order to provide families with a low-cost, temporary life insurance option. Term life insurance is the perfect fit for policyholders who have a mortgage, car, student loans or other expenses to pay off. It is also beneficial coverage for those who have additional expenses during the child-raising time of their lives.
Who Uses Term Life?
Term life makes sense for individuals and families who want term insurance to makeup a portion of an overall financial plan or life insurance coverage strategy. Since term life cost substantially less than permanent life insurance, people may decide to purchase some of both types of insurance as part of their financial plan. Many home owners purchase term life insurance to ensure their estate will have the ability to pay off their cars, mortgage and funeral expenses in the event they, their spouse or partner passes away.
What Age Group Buys Term Life?
Young individuals and new families are typical candidates for term life insurance. Additionally, single parents, divorcees or a widower who needs coverage for a set number of years will usually purchased term life, as it gives coverage in terms of 10, 20 or 30 years periods. Even though term life insurance has low premiums initially, as policyholders age, premiums to start to increase. Some term life policies increase upon renewal, while other types of term life have a premium increase in each year. When individuals hit age 65, the cost of term life insurance begins to equal or become more expensive than permanent insurance, and may not make sense for all individuals. A typical financial plan would involve having all major expenses paid off before age 65, so that term insurance would no longer be needed and savings plus retirement income would cover any expenses for a remaining spouse.
What is the Typical Income Level for Term Life Buyers?
One of the nicest features of term life insurance is the low premium. If a person wants to ensure his $700,000 of mortgage and other financial obligations will be taken care of upon his premature death, this amount of term life coverage can be had for an extremely reasonable cost. It is not easy to name a specific level of income, since each person or family situation has its own unique set of needs and features. However, if an individual or family dies without having enough available cash to take care of debt obligations, then a term life policy would make sense.
What are Some Typical Rates?
As an example, take a male, 40-year-old, non-smoking person in good health. Suppose he purchases $500,000 worth of term insurance coverage - this would cost him about $650 each year, or slightly more than $54 a month, for this level of coverage in 2007.
Term life insurance rates depend upon many factors, with health, age and any history of smoking being the most important factors. According to an insurance study that reviewed average premiums for term life insurance at the top six insurance companies with the lowest premiums, during the years 1997 to the to 2007, the cost of term insurance has decreased over the years. The $650 policy that our 40-year-old healthy male non-smoker purchased in 2007 would have cost him $950 per year for the same coverage back in 1997.