AFFORDABLE TERM LIFE INSURANCE QUOTES

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Understanding Affordable Term Life Insurance


There are many commercials that pop up on television and radio promoting the value of getting an affordable term life insurance quotes. Now, most people have a clear understanding of what a term life insurance quote entails. However, they may be unaware what the concept of term life insurance centers on. For those that may have a number of questions regarding this form of coverage, the following is a brief overview of what it entails.


As with other forms of life insurance, term life insurance centers on offering a “death benefit.” That is, when the insured dies the beneficiaries will be paid a settlement amount based on the amount of coverage that the insured purchased. Again, this is standard with all life insurance policies. However, term life insurance is different in one respect. Specifically, term life insurance only provides coverage for a certain designated period of time. This timeframe is, of course, the term mentioned in the title of the coverage.


In short, the coverage is purchased for a specified term. When the term expires, the insured has the option of purchasing a new policy. In some instances, it may be the exact same policy at the same price. In other instances, it could be a new policy at an increased price or different terms. And, of course, the insured could also downgrade the policy for a lower premium. Really, this is the major benefit of purchasing a term life insurance policy. A person can save a lot of money on the purchase of a policy since the policies are being purchased in fixed terms.


This makes term life insurance perfect for those that may be on a proverbial budget. Anyone looking to make sure their family is properly covered in the advent of an emergency can take out a short term policy at a reasonable cost. That alone is a huge endorsement for term life insurance.

Term Life Insurance as Asset

Most people don't realize that life insurance is an asset. In fact, it's the best kind of asset or more importantly, a true asset as opposed to say..your primary residence (with a mortgage attached). As with all assets, there are some important things you can do with it both before and after the benefit is triggered. Let's take a look at how life insurance should be viewed as an asset.

First, what is an asset? Some people have somewhat of a hazy view while others are just plain wrong. What about your primary house? Is that an asset? Well it depends. If you do not derive any income from your house and only pay out due to a liability (your mortgage debt), then it's hard to call it an asset. Even when you have full paid off the mortgage, it's still not ideally what you would want in an asset. An asset should pay income. Your primary home does not pay income. Yes, you're building value over time but that doesn't really help you make ends meet if a primary earner in the family passes away. In this regard, it's more like a liability. It all comes down to cash flow and cash flow is what hits people so hard when the income suddenly vanishes due to the unexpected loss of a family member.

Life insurance on the other hand, can be the source of income if the insured passes away. It's also the best kind of income because it is typically tax-free. Don't underestimate the importance of this. If you you earn $50K annually through salary, it's probably more like $35K after tax as you're all too aware of. Average tax brackets tend to run from 20 to 30%. Life insurance benefits are generally not taxable. This means $500K is $500K. This becomes even more important since our tax system is "progressive". This means that the more money "earned", the higher your average tax rate will be. It can even approach 50% when adding federal, state, and so-called "windfall" tax rates. Congress has tried to go after this tax-free status of life insurance but the push-back has been too great. So we have a tax-free asset in term life insurance. Why, would this be an asset? It can create income. If you take your $500K (to continue our example) and invest it, at 5% you're looking at $25K annually. That's income derived from an asset and it's a critical function of life insurance.

 You can also just spend down this "asset" if you choose since it's highly liquid. Selling a house can be a difficult proposition reliant on market conditions and other factors (not to mention the question of where are you going to live?). The life insurance benefit is cash. You do not get a more liquid asset than that. If you spend down the asset, you will not retain a residual asset which earns money but you will have more cash flow in the meantime. For example, if we spend $50K each year (to match our replaced income), we have 10 years at this level. At a minimum, that gives you a decade to get your financial house in order following the passing of a loved one and the lost income. Many people without life insurance find themselves having to make truly life-changing decisions in a very short span since they don't have the immediately created asset that life protection offers. Again...most people will essentially be bankrupt in a matter of months if the family's income disappears or is even cut in half. Term life provides the asset and more importantly, the income to avoid this situation at an affordable cost.

Dennis Jarvis Dennis Jarvis is a licensed insurance agent concentrating on finding the Rate this Article:
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