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WEDNESDAY, APRIL 14, 2021 | Roman

Term life insurance: How to protect your loved ones financially

Term life insurance: How to protect your loved ones financially

Term life insurance is one of the most important types of insurance. It provides financial protection for your loved ones in the event of your death. In this guide, you will find out when a term life policy is worthwhile, how to find the best rates and what you should definitely look out for when taking out a death cover. In our test, we present the best term life insurance offers.

TERM LIFE INSURANCE - WHY YOU SHOULD HAVE IT

Many people are concerned with asset accumulation, but very few are concerned with financial security for their family in the event of their own demise. Yet this is always important - especially if you are paying off a loan or are the main breadwinner in the family. But what is the best way to protect your family financially? Term life insurance is one way. That’s because term life policies pay an agreed-upon sum to your survivors if you die. That’s why term life insurance should be one of the most important policies for you and your family.

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In this guide, you’ll learn whether you need term life insurance, what to look for when buying a policy, and how to find the best rate for coverage in the event of your death.

HOW TERM LIFE INSURANCE WORKS

Term life insurance pays an agreed sum to survivors if the policyholder dies. You decide how much this sum will be when you take out the insurance. If, for example, you have taken out a loan to finance your own property, you can insure exactly this sum. If you die, your family can then pay off the loan.

Important: With term life insurance, you do not save any amounts; this insurance only covers you for the worst case scenario. By the way, term life insurance is also significantly cheaper than traditional life insurance.

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FOR WHOM IS TERM LIFE INSURANCE WORTHWHILE?

Addressing the issue of protecting your family beyond your death is an important one. In the following cases, term life insurance is indispensable in our view:

REAL ESTATE FINANCING - TERM LIFE INSURANCE TO SECURE THE REMAINING DEBT.

If you finance your house with a loan, you usually pay it off over many years. Depending on how the real estate financing is structured, your partner may not be able to pay off the loan on his or her own. This is especially the case if you are the main breadwinner in the family.

In such cases, the (spouse) partner should definitely be covered so that he or she can pay the family’s remaining loan debt in the event of the main earner’s death.

Our recommendation: In real estate financing, it does not matter whether you jointly bear the debt as a married or unmarried partner - the risk should be secured in any case. Sometimes a residual debt insurance may be an alternative.

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WHEN IS TERM LIFE INSURANCE WORTHWHILE FOR THE SELF-EMPLOYED?

Term life insurance can also be worthwhile if you are self-employed and have a business together with one or more business partners. In this case, unpaid loans can become an issue - often the financial burden is shared among several people at the same time.

Tip: In this case, check whether you can run the term life insurance on your own company. Your partners should be financially protected even without your contribution.

TERM LIFE INSURANCE FOR SINGLE PARENTS

As a single parent, you can cover your minor children with term life insurance by designating them as beneficiaries.

Important: As a rule, it is advisable that you appoint a guardian for your child. Otherwise, the insured sum may not be paid out directly. As long as your children are minors, the guardian receives the money. Children do not receive the money until they are of age.

PROTECTING DEPENDENTS: SUPPLEMENTING THE WIDOW’S/ORPHAN’S PENSION

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Term life insurance is also worthwhile, especially if you need the income of all family members to fund your living expenses. In particular, if you are the main or even the sole earner in the family, term life insurance is essential.

Also, if you have children and both need full income, you should work through all contingencies. Would your family still have enough money if your partner had to cut back on his professional activities because he would then be a single parent?

LINKED TERM LIFE INSURANCE FOR MARRIED COUPLES

If you want to insure yourself and your wife or husband together, the so-called linked term life insurance is an option. Here, the insurance company pays out the agreed sum to your partner or, in the event of joint death, to your surviving dependents.

What are the advantages of a linked term life insurance? This insurance is significantly cheaper than two separate term life insurance policies. The linked term life insurance is therefore definitely worthwhile if both partners want to cover themselves. As a rule, however, it is somewhat less flexible in terms of the sum insured and the term.

Important: With a linked term life insurance policy, parents should play it safe and choose a sum insured that ensures your children are adequately provided for even in the event of the death of both parents.

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