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Personalizing Your Policy

When you buy term life insurance coverage, you'll have to select a death benefit and the length of your policy's term. Read on to find out how to customize your term life policy to accommodate your coverage needs.

Death Benefit

The death benefit of a term life policy is the lump-sum amount that your beneficiaries would receive if you died while your policy is still in force. The larger the death benefit of the policy, the higher your term life insurance estimates will be. Your death benefit will need to cover the following expenses:

  • Funeral and burial. The average funeral these days costs around $10,000-$15,000, which is quite a bit of money for most families. You should allow for funeral and burial expenses when choosing your coverage amount. Also think about other final expenses, such as tax issues, estate planning, legal costs, etc.
  • Your income. Your policy will need to replace your annual salary for as many years as your family needs it. Don't forget to account for inflation in your term life policy.
  • Debts. You should solicit term life insurance estimates on enough coverage to pay off your family's current debts, including home loans, credit cards, auto loans, and other obligations.
  • Major expenses. If you want to help your children pay for college or provide your spouse with additional income during retirement, you should adjust your death benefit accordingly.
 

Policy Term

You will also need to select the length of your term life insurance policy. Longer terms will provide more lasting protection, but they will also result in higher term life insurance estimates. When setting your policy's term, think about how long your family would need your assistance before becoming self-sufficient. For most families, life insurance benefits are most critical until all of the children reach the age of 18 or graduate from college. If you have young children, you might want to select a term of 20, 25, or 30 years to see your family through. Some insurers offer estimates on term life insurance policies with terms as short as five years if you have more temporary needs. For example, you might take out a ten-year term policy to purchase insurance protection just until your home mortgage is paid off.

Convertibility

Many insurance companies offer term life insurance estimates on policies that can be converted to whole life coverage at any time without an additional medical exam. These policies are referred to as convertible term life. The convertibility option may cost you more money, but it will also give you more flexibility if your coverage needs ever change.