What Is Term Life Insurance And Why Do I Need It?

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Team Waffle
April 12, 2023
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Term Life Insurance for Newbies Course Part 1

Do you have a family? Spouse? A mortgage? If so, you NEED term life insurance.

Hey there, It’s Team Waffle and in this blog I'm going to talk to you about something that is super important, but often overlooked: Term Life Insurance. A lot of people think they don't need it because they're young and healthy, but the fact is that if something happens to you, your loved ones are going to be left with a lot of bills to pay. That's where term life insurance comes in. 

Welcome to our "Term Life Insurance for Newbies" course.

In this first blog, we'll be discussing the basics of life insurance, common life insurance terms, what term life insurance is and why it's important to have. So sit back, relax, and get ready to learn about one of the most important types of insurance options out there.

So What is Life Insurance?

Essentially, life insurance is a contract between you and an insurance company. This contract works like this: you pay premiums, usually on a monthly basis, to the insurance company and in return they agree to pay a death benefit to your beneficiaries when you die. 

This payment could range from tens of thousands of dollars up to hundreds of thousands or even millions depending on the policy type and coverage amount chosen by you. 

Now, that may all sound like a bunch of gobbledygook. So let's go through what each phrase means when it comes to life insurance.

Life Insurance Dictionary

A premium is the amount of money you pay to the insurance company for your life insurance policy. The premium is usually paid monthly, and it is based on factors such as your age, health, and the death benefit amount.

The death benefit is the amount of money that your beneficiaries will receive from the insurance company when you die. The death benefit can be used to help your family with expenses such as funeral costs, debts, or everyday living expenses.

A beneficiary is the person or people who will receive the death benefit from the insurance company when you die, such as a spouse, family member, or even a best friend. You can name one or more beneficiaries on your policy, and you can change your beneficiaries at any time.

When you purchase a life insurance policy, you will need to decide how much coverage you need. Coverage is the amount of money that the insurance company will pay out to your beneficiaries if you die. There are a few factors to consider when deciding how much coverage you need, such as your debts, dependents, and financial goals.

Life insurance Recap

So just to recap what you’ve learned, life insurance is a contract between you and an insurance company. You pay the insurance company a premium, typically on a monthly basis, and in return the insurance company agrees to give your beneficiaries the death benefit when you pass away.

Another way to think about life insurance is through video games. You know when you're playing video games and you have a backup plan or a life-saver power-up just in case you die? That's basically what life insurance does for your loved ones in real life. It's a financial life-saver that kicks in if something unexpected happens, like an untimely death, so your loved ones can keep living their lives without worrying about any financial emergencies.

But Wait, There’s More!

Yep, there’s actually multiple types of life insurance policies. Don’t worry, we’ll dive more into that in the next video! But we do want you to keep in mind these main two types of life insurance: Term life insurance and permanent life insurance. 

Term life insurance is coverage for a set period of time, while permanent life insurance provides coverage for your entire life.

Here’s The Term Life Insurance Breakdown

Like we said earlier, Term life insurance provides coverage for a specific period of time, usually between 10 to 30 years. That means that if you happen to pass away within that set time frame, your beneficiaries will receive a death benefit payout from the policy. If you live longer than the term of the policy, then the coverage expires and you will not receive any payout. 

You might be thinking, what’s the point of even paying for term life insurance if I outlive the coverage? There are many reasons to get covered! Here’s why term life insurance is important and why you might need it more than you think.

Why Term Life Insurance Is Important

For starters, if you have people in your life who depend on you financially, like a spouse, kids, or even aging parents, it's important to make sure that they're taken care of if something were to happen to you. That's where term life insurance comes in. It provides a lump sum payout to your beneficiaries if you were to pass away during the term of your policy.

Not to be the Debbie downer here, but no one knows when their time will end. There’s not a consistent email reminder nor google calendar invite for this. It’s best to be prepared.

Another reason to get term life insurance is if you have outstanding debts that you wouldn't want to pass on to your loved ones. For example, if you have a mortgage, car payments, student loans, or credit card debt, a term life insurance policy can help ensure that your beneficiaries can use the payout to pay off those debts, so they're not burdened with them after you're gone.

Finally, if you’re planning on just picking permanent life insurance, double-check the price tag! Term life insurance is often more affordable than other types of life insurance. This makes it a great option for people who want coverage but may not have a lot of extra cash to spend on premiums.

So, in summary, term life insurance is important because it provides financial protection for your loved ones, helps pay off debts, and is often more affordable than other types of life insurance.

Thanks For Tuning In!

Thanks for reading the very first chapter in our “Term Life Insurance For Newbies” course! If you’re still on the fence on which life insurance option is best for you, stay tuned as we’ll be discussing the different types of life insurance available in the next chapter!

Term Life Insurance for Newbies Course