Term life insurance is designed to protect your income for a certain time, it is also one of the least expensive types of life insurance. Term life insurance policies come in numerous forms. There is an annual renewal term, all the way up to a 40-year term policy. The term of the policy is the length of time your rate is locked in. A $500,000 20 year term life insurance policy would lock the rate in for 20 years, the price would not change for the 20 years (the term). After the term is up, most companies will make the policy guaranteed renewable up to age 95, this means that the insurance company will rate you at your age at the end of the term. So if you were 30 when you took out the 20-year term policy, they will rate you as 50 and the price will go up every year or five years depending on the terms of your policy.
I recommend term life insurance for anyone with a mortgage or children under 18. For instance, if you own a home with a mortgage you should get a policy depending on the term, say you owe $230,000 for the next 30 years. I would recommend a $250,000 30 year term life insurance policy. This would protect your asset in the event of your death. After the 30 years, you shouldn't need the coverage or you could convert the policy to whole life insurance or universal life insurance.
If you have children under 18 term life insurance is one of the best ways to make sure in the event of your death your family is protected. First, you must ask yourself how long you would want to make sure your family is protected. Do you want to protect your family until your children graduate high school? Until they turn 18. Do you want them to go to college? Until they turn 24? Something I have been hearing a lot is that most parents these days want to get their kids to 30. We can do some simple math to determine the amount of coverage you need to have to protect your family.
Let's say you have two wonderful children, one is a year old and the other is four. You want to make sure your family has enough money to get your kids through college. So for the next 21 years, you need to be protected. You have a one-year-old and a four-year-old, you expect your kids to graduate at 22. 22- your youngest child's age (one)= 21. Let's say you make $50,000 a year and your spouse makes $40,000 a year. Your family is going to lose $50,000 a year if you died tomorrow, you would be dead, so obviously you would be unable to work. You need to multiply your $50,000 times the years you need protection. $50,000 x 21 = $1,050,000, this is the amount of money your family would lose due to your death. For your spouse $40,000 x 21 = $840,000. So we know the amount you should be covered for, the next thing we need to look at is the term on the term life insurance policy. AIG allows you pick a term in almost any amount of years, most term life insurance policies are in increments of five years, 10, 15, 20, 25, 30, and now 35, and 40. I would recommend a 25-year term in this scenario. So you have to have a $1,050,000 25 year term life insurance policy, your spouse needs a $840,000 25 year term life insurance policy to keep your family protected.