5 Ways to use Term Life Insurance
3 min readMar 16, 2023
- Income replacement: One of the most common uses of term life insurance is to provide income replacement for your family in case of your untimely death. The death benefit can be used to replace the lost income and help your loved ones maintain their standard of living. In most cases its recommended that you have between 7 to 10 years of you income in you policy. For example, if your income is $50,000 a year you should have a policy benefit between $350,000 to $500,000. This may sound like it would be expensive if you’ve seen how expensive Whole Life Insurance can be, but term is not permanent insurance so it is a fraction of the cost of Whole Life insurance.
- Covering education expenses: You can use term life insurance to fund your children’s education expenses in case of your untimely death. The death benefit can be used to cover their tuition fees, books, and other related expenses. It can also be used if you have some unpaid education expenses. As of now these school debts are not passed on after a persons passing but because of the growing amount of defaults it is being considered. At the end of 2021, roughly 3 million people, close to 7% of all student loan borrowers were in default.
- Covering final expenses: Along with income replacement, covering final expenses is another common reason people buy Term Life insurance. You can use term life insurance to cover your final expenses, such as funeral costs, burial expenses, and medical bills. This can help relieve your family of the financial burden and ensure that your final wishes are met. The average funeral in the U.S. is between $8,000 and $10,000 dollars. Due to the low cost of Term coverage most people can cover their burial costs and leave money for their loved ones.
- Mortgage protection: If you have a mortgage, you can use Term Life insurance to protect it in case of your death. The death benefit can be used to pay off the mortgage, ensuring that your family can continue living in the home. For example, if you have a $300,000 30 year mortgage, you could get a 30 year $300,000 Term policy that could be used to pay off the balance of your home and eliminate one of the biggest expenses that your loved ones would otherwise be left with.
- Living Benefits: A lot of people don't know but some insurance companies offer Living Benefit options with their Term Life products. These benefits can give you access to some of your benefit while you are still living if you are diagnosed with a terminal illness or need to go into a nursing home. They can also waive your premium payments if you become disabled. Some of these benefits are included in the policy and others are available for a fee and can be added as a rider. Make sure to check with your carrier or agent to see what options are available for you.
