Buying life insurance gives your loved ones a financial safety net. In some cases, though, people experience coverage gaps. For example, if you get life insurance from your employer, you could experience a gap when you take a new job. Short term insurance helps fill in the gaps so you don’t leave your family unprotected.
Short term life policies vary, but most of them will only cover you for up to one year. If you die during that time, your beneficiaries will receive a predetermined amount of money. The money essentially replaces your contribution to the family, so they can use the cash to cover expenses like your funeral, housing, and education.
Most people purchase a short term policy when they have life insurance coverage gaps. You can also get a policy for additional coverage. For instance, you might want the extra coverage when you plan to travel or enter a dangerous situation. By getting the policy, you help ensure that your loved ones have the financial resources that they need after your death.
Other times that people choose to get extra short term life insurance include when they:
Have large debts that their regular life insurance policy cannot cover.
Participate in extreme sports like rock climbing, mountain biking, and snowboarding.
Worry that an illness will cut their lives shorter than expected.
Most people can get short term policies. Some people, however, may not qualify.
When you apply for a term life insurance policy, the provider will probably want you to get an in-depth medical examination. If the examination discovers that you have a severe illness, then the insurance company may deny you coverage.
Insurance companies may also deny coverage to people who make unhealthy lifestyle choices. Using tobacco and illicit drugs, for example, makes it much harder to qualify for an affordable policy.
Even though people often buy short term life insurance for additional protection when they plan to travel or participate in dangerous activities, some policy providers will refuse applications based on those behaviors. If the company knows that you plan to go skydiving next week, there’s a chance that it will not want you as a customer.
Having a minor health issue or enjoying potentially dangerous sports doesn’t necessarily mean you cannot get term life insurance. Companies may, however, charge you a higher price to offset the risk. Falling into an at-risk category doesn’t necessarily mean you won’t get covered, but you should expect to pay more money.
Ideally, your loved ones will never have to use your term life insurance policy. Assuming that you outlive the policy, though, you forfeit the death benefit. The insurance company keeps the money you spent on the policy, but it does not pay you anything.
Keep in mind that this type of life insurance is meant to offer additional coverage and gap coverage. You’ll probably only have the policy for a few months to a year. If you pass away during that time, your family will get the full death benefit described in your policy. If you do not die, nothing happens. You stop paying for the policy, and the insurance company does not pay you a benefit.
Term life and whole life insurance have unique features that can make them useful for some people. One isn’t necessarily better than the other. But one may fit your needs better.
Term life insurance covers you for a specific amount of time. If you get short term coverage, then the policy will typically last less than one year. Other term life insurance policies can last 20 to 30 years, though.
If you pass away while your policy is active, then your beneficiaries receive payment from the insurance company. If you live past the policy’s expiration date, then you do not get anything from the insurance company.
Term life insurance, in other words, is only meant to cover you for a specific amount of time. Since the policies only pay when you die, they usually have lower prices than whole life insurance.
If you want an affordable insurance policy that protects your family from financial burden, then term life could be a good option for you.
Whole life insurance has several features that differentiate it from term life insurance. As the name suggests, the insurance policy lasts throughout your lifetime. Since the policy’s don’t expire, they tend to cost quite a bit more than term life insurance.
Whole life insurance, however, gains value over time. When you pay your premiums, a portion of it gets invested by the insurance company. The investment strategies tend to err on the conservative side, so you probably won’t see extraordinary growth. On the other hand, conservative investment strategies help ensure that your policy’s value keeps growing.
What does the cash value of your policy do? You can use it in a couple of ways. Many people use the cash value of their whole life insurance policies as collateral when they apply for loans. The collateral often makes it possible to qualify for a lower interest rate. As long as you repay the loan on time, your insurance policy stays safe.
You can also access the cash value of your whole life insurance by canceling the policy. When you cancel, the insurance company writes you a check for the value of your investment. Keep in mind that the insurance company may charge some fees for processing and other services.
Short term life insurance for 2020 can give you additional coverage that helps protect your loved ones. Explore your options to find a policy with reasonable rates and a high payout. The extra coverage could matter quite a bit to your beneficiaries.