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Six Tips on Term Life

James McGlynn

I RECENTLY LISTENED to a podcast during which the speakers lamented the death of a colleague who was in his 30s. They mentioned a GoFundMe campaign to assist his family, so I assume the deceased had no life insurance. According to LIMRA, which collects data on the life insurance industry, less than 50% of millennials have individual life insurance.

There are two major types of life insurance: term and whole life. Term insurance is intended to cover a specific period, such as 10 or 20 years. Whole life insurance is more expensive because it’s designed to cover the insured’s “whole life” and part of each premium goes to fund an investment account.

Want the maximum death benefit for minimal cost? Term insurance is the way to go. Here are six pointers:

  • Life insurance is least expensive when the applicant is younger, healthier and a non-smoker.
  • It’s more expensive for men, thanks to their shorter life expectancy.
  • Both husband and wife should usually get coverage—even if one doesn’t earn an income. Why? The spouse who doesn’t work outside the home typically performs tasks—cleaning, cooking, child care—that would be costly to replace if he or she died.
  • The death benefit from life insurance is usually tax-free.
  • If a beneficiary is named, there’s no need for the policy’s payout to go through probate.
  • When buying term insurance, a good rule of thumb is to structure the insurance so it’ll be in place at least until the children graduate college. The amount of coverage might include enough to pay for college and pay off the mortgage.
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