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Compare Term Insurance - How to compare and consider term life insurance policies

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Life insurance is a practical necessity for those with families or loved ones that need protection. Consumer debt, provisions for dependents, provisions for college education for dependents, funeral costs and mortgages are provided for.

Term life insurance, which guarantees life insurance coverage for a specified period of time, is the lowest cost way to provide a death benefit for family members and beneficiaries. The premium for term life insurance is based on the expected probability of the insured dying during a specific time period. The longer the term, the higher the insurance cost. Cost may also rise with the age of the insured. If one were to get insured for only a year, the likelihood of most dying in one year is very low.

Some life insurance policies offer guaranteed reinsurability, which allowed the insured to renew without proof of insurability. Annual renewable term insurance is commonly purchased with a yearly renewable term that is guaranteed to be continued for a given number of years. As the age of the insured increases, premiums increase until at a certain age, renewal typically becomes financially impractical.

A more typical lower end term for life insurance would be about ten years. Before paying, proof of insurability is required. There are usually around four different levels of insurability, based on health. Coverage cost also increases with age. Usually, a fixed rate is offered then for those ten years, but rates may increase upon renewal. Fifteen, twenty and thirty year terms are commonly offered as well. The longer the term, the higher the premiums increase. Renewal may or may not be guaranteed, so this should be carefully looked for in the contract.

Before investing, it is needed to figure out how much life insurance the insured needs. Aim to buy enough coverage that the amount received in case of death makes up for the family/loved one’s deficit. If you figure on needing around $120,000 in insurance for every $500 of monthly income required, then you should be able to calculate the amount needed. So, for example, if $3,500 a month is needed to cover all expenses and income taxes, and your worst case scenario is that the dependents will have no other wages or income, than calculate on this full amount. To do this you would divide $3,500 by $500 to get a factor of 7. So, in this case, the insurance policy should be 7 times $120,000 or $840,000 worth of coverage. It is most practical to buy enough coverage to cover the families needs for the smallest amount of time in which the family is able to make adjustments and cover its own needs.

Mortality tables are used to calculate the cost of insurance. The death benefit is income tax free. Insurance industry studies have shown the likelihood of filing a death benefit claim under a term insurance policy is low, making tern life insurance low enough to be a viable means of protecting family members.

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