Term Life Insurance in Texas
In Texas, Term Life Insurance offers coverage for a specified period, which may be one year or anywhere from 5 to 30 years or longer. A death benefit is usually paid to the beneficiaries named on the policy if the policyholder passes away within the term length. However, no death benefit is paid if the policyholder outlives the term length. The death benefit received by the beneficiaries can be used to help pay for things like a mortgage, college costs, or daily expenses, such as groceries.
A Term Life Insurance policy typically ends at the end of the term unless the policyholder pays to extend it. Premiums usually remain the same for the entire term but may go up if renewed at the end of the term. This is because the new premium will be based on the policyholder's current age at the point of renewal. To avoid paying higher premiums later, a policyholder may consider buying a policy with a longer term.
The major difference between Term Life Insurance and other types of life insurance in Texas is that Term Life policy is temporary. Term coverage only protects policyholders for a limited time as chosen at the point of purchase. Anyone with a temporary financial need for life insurance protection or have people who depend on them financially should consider getting Term Life Insurance. In Texas, a typical Term Life insurance policy does not pay death benefits for deaths caused by suicide, self-inflicted wounds, participating in dangerous activities, and a plane crash on a private jet.
What is Considered Term Life Insurance in Texas?
Term Life Insurance is a type of life insurance whose death benefit is only paid if the policyholder dies during the policy term. Most terms typically last for 10, 20, or 30 years and if the insured outlives the coverage, the policy expires, and benefits are lost. When the policy is about to expire, the covered person can convert the policy to permanent coverage, renew it for another term, or terminate it. However, if the insured dies within the term, the death benefit would be paid to the policy beneficiary. The proceeds from the death benefit can be used to help pay for funeral arrangements and day-to-day bills such as mortgage and child care.
There are two key features that come with Term Life policies that make it easier to get a different type of policy or keep your existing one. These are:
Convertibility: This feature gives policyholders the opportunity to exchange their term policy for a permanent life policy without having to take a medical exam or answer any health-related questions. It can be very beneficial for individuals whose health worsens after buying a term policy. Most times, converting a policy will raise your premiums.
Renewability: This feature allows policyholders to extend their policy for additional terms, regardless of their health issues, and without having to take medical exams.
What is the Point of Term Life Insurance?
Term Life Insurance is a temporary policy that can cover your family if you die within the policy term. A death benefit is usually paid to beneficiaries if the policyholder dies within the set period of time.
What is Term Life Insurance for?
Term Life Insurance is majorly for paying death benefits to policy beneficiaries, provided the insured dies within the policy term. The death benefits can help cover college tuition, pay off a mortgage, or help fund retirement.
What are the Types of Term Insurance?
Term Life Insurance typically comes in two types which include:
Level term: This is a type of term life insurance where the death benefit amount remains the same during a policy term, regardless of when the insured passes away.
Decreasing term: This is a type of term life insurance in which the death benefit amount decreases periodically until the end of the term.
Do you Need Term Life Insurance?
Although it is not mandatory to have Term Insurance in Texas, individuals who have people who depend on their income should consider getting it. The death benefit from this policy can be used for many purposes, including replacing income, paying off outstanding debts, and covering future financial needs. The amount of term insurance coverage you need is largely dependent on your needs. However, consider the following factors before purchasing a term insurance policy:
Current and future liabilities and assets: Consider outstanding loans and debts.
Future goals: Achieving financial objectives like retaining the lifestyle of your family members when you die, paying college fees for your children, children’s wedding plan could be incorporated into the term insurance plan.
Term Life plan tenure: Buy a term life plan early because its premium increases with age. Additionally, you want to ensure that you are covered during the most susceptible phase of your life.
Term insurance premiums: Go for premiums that fit into your budget.
Why Do you Need Term Life Insurance?
The major reason why you need a Term Life Insurance plan in Texas is to make sure that your loved ones have enough money to provide for themselves if you die untimely. The best time to get Term Life Insurance is immediately you start working to create enough wealth to secure your family’s future, especially in your absence. Hence, anyone, including young professionals, newly married couples, and working parents, can opt for a term life insurance plan. It allows you to leave money behind for your spouse, children, other family members, friends, business, or charity.
How Much Term Life Insurance Do you Need?
The amount of Term Life Insurance coverage that you need in Texas primarily depends on your needs. Such needs may be influenced by factors like outstanding debts, your income, projected funeral costs, and college tuition fees for your children.
When you consider all those factors, you’ll have a good idea of how much insurance you’ll need. Generally, it is better to have at least 10-15 times your income in Term Life Insurance coverage, considering inflation and increasing living costs. However, you may want to buy even more coverage depending on your lifestyle and needs.
Determining how much Term Insurance coverage you need can be quite challenging. Hence, it is a good idea to discuss your concerns and intentions with a Texas-based licensed insurance agent who can help you identify a policy that fits your precise needs.
What Term Life Insurance Coverage Do you Need?
The type of Term Insurance coverage to purchase largely depends on your needs. For instance, Level Term Insurance can be the better option for individuals who want to ensure their family can pay for daily living expenses and household bills after their demise. Decreasing Term cover may be more suitable for a person who only wants enough coverage to pay off an outstanding debt. Individuals who are unsure of which type of cover is best for them can speak to a Texas-based licensed insurance agent to discuss their options and find them the most appropriate coverage.
Is Term Life Insurance Required by Law in Texas?
Texas does not mandate individuals to have Term Life Insurance in Texas. However, individuals who have a family that depends on their income or have a mortgage should consider getting Term (or any other kind of) Life Insurance.
How Does Term Life Insurance Work?
Term Life Insurance covers a specified period, and if the policyholders die during the policy term, their beneficiaries will get the death benefit. However, If the policyholders outlive the term period, no one will receive the death benefit. Therefore, policyholders should ensure that their term lasts as long as their loved ones still depend on their (policyholders) incomes. Term Life Insurance is generally recommended for anyone with a dependent. A significant benefit of this policy is that it is very affordable and a good way to provide financial security for your loved ones in the event of your demise. Policy beneficiaries are required to file a claim with the insurer after the policyholder's demise to access death benefits.
What Does Term Life Insurance Cover?
Term Life Insurance covers expenses like funeral costs, burial expenses, college tuition, and paying off a mortgage.
What is Term Life Insurance Good for?
Term Life Insurance is good for leaving money behind for your loved ones when you die. Individuals can get more clarity on how this works by contacting an insurance agent licensed by the Texas Department of Insurance (TDI).
What Does a Typical Term Life Insurance Include?
Term Life Insurance includes coverage for natural death and death that is health-related. Under these circumstances, the policy beneficiary will be paid the death benefit. A typical example of natural death is if insureds pass away in their sleep. An instance of a health-related death is if insureds contract any disease or fall ill, and the illness eventually leads to their death. Term Life Insurance also covers accidental deaths involving but not limited to motor vehicles, machinery at the workplace, building collapse, natural disasters, and electric shocks. Contact an insurance agent licensed by the Texas Department of Insurance (TDI) to learn about Term Life Insurance coverage.
Who is Covered by Term Life Insurance?
Personal Use of Term Life
Term Life Insurance typically covers the insured. For instance, if the insured gets a term life insurance for a specific period and dies within the specified term, a death benefit will be paid to the insured’s beneficiaries. This death benefit can be used for any purpose, including paying daily bills, funeral expenses, and debts.
Business Use of Term Life
Business owners, business partners, and employers can also opt for Term Life Insurance. For instance, a business owner can purchase Term Life Insurance for business partners such that in the event of the business partner's death, the business owner will have funds available to buy the decedent's share of the business.
What is not Covered by Term Life Insurance?
Term Life Insurance typically seeks to financially protect policyholders’ beneficiaries in the event of their demise. However, the policy may not pay out the death benefit if the insured dies of suicide within two years of purchasing the policy, self-inflicted wounds, participating in dangerous activities, and a crash on a private jet.
What Does Term Insurance Typically Exclude?
Although a Term Life Insurance policy is designed to pay out a death benefit when an insured dies while the policy is still active, most policies contain certain exclusions. Term Life Insurance coverage typically excludes:
Accidental death due to intoxication or drugs.
Death caused by the insured’s involvement in criminal or illegal activity.
Death caused by the insured’s participation in dangerous activities like hand-gliding, skydiving, paragliding, and bungee jumping.
Death caused by self-inflicted wounds and suicide committed two years after puchasing the policy.
Death as a result of a crash on a private plane. This might be covered by Accidental Death and Dismemberment (AD&D) insurance.
Death caused by an act of war. Workers compensation may cover injuries or death caused by war.
Generally, exclusions vary from one insurer to another. Hence, policyholders should read their policy terms carefully to determine the policy’s exclusions. Speak to a Texas-licensed insurance professional for more clarification on Term Life Insurance and how you may be able to get coverage for what is typically excluded.
Always read the exclusions for all insurance contracts - first. They are usually found towards the end of the contract
What is an Example of Term Life Insurance?
Mr. Rock buys a $500,000 10-year term life insurance policy with a premium of $50 per month with the aim of protecting his family in the event of an untimely death. If Mr. Rock dies within the 10-year term, the policy will pay its beneficiaries $500,000 as death benefit amount. However, If he outlives the 10-year term period, the policy will expire, and there will be no pay-out by the insurer. In addition, if Mr. Rock decides to renew the policy, the premium will be higher than the initial policy considering his current age.
Individuals and organizations can purchase Term Life Insurance. Individuals can use this type of insurance to replace income, pay off debts, children’s college fees and help families cover their final expenses and medical bills. Additionally, organizations can use this policy as fringe benefits to demonstrate how much they value their employees and how dedicated the organization is to keep them happy and healthy. It can also be used as a recruitment incentive to attract and keep top talents.
What is the Most Common Use of Term Life Insurance?
The most common use for Term Life Insurance is to replace policyholders' income after their demise. The death benefit that comes from the policy can be used to cover funeral expenses, medical bills, and pay off debts such as a mortgage.
What is the Difference Between Term Life Insurance and Whole Life Insurance?
The major difference between Term Life Insurance and Whole Life Insurance is that Term Life Insurance provides coverage for only a predetermined number of years while Whole Life Insurance provides coverage for a lifetime. Additionally, a Term Life Insurance policy pays for death benefits only while the Whole Life pays for more, including death benefits and cash value, against which you can withdraw or borrow.
When comparing Term Life Insurance and Whole Life Insurance, the best coverage for you will depend on your specific needs. Therefore, you should carefully evaluate your options before choosing any policy. It is also a great idea to talk to an insurance agent licensed by the Texas Department of Insurance (TDI) before purchasing any life insurance policy.
What is Better Term Life Insurance or Whole Life Insurance?
Term Life Insurance offers temporary coverage for a specific number of years, while Whole Life Insurance provides lifelong coverage. Additionally, Whole Life Insurance builds cash value over time, and you can get all your money if you cancel the policy before you die, but Term Life has no cash value. Whole life is more expensive, so Term Life Insurance may be better if you want budget-friendly coverage. However, it is better to opt for Whole Life Insurance if you want lifelong coverage, which accumulates tax-deferred cash value with living benefits. Generally, the preferred option between Term Life Insurance and Whole Life Insurance depends on your specific needs. Speak with a Texas-based licensed insurance agent to know which policy best suits your current need.
Do I Need Term Life Insurance - FAQ
Do I Need Term Life Insurance if I Have Medicare?
Individuals who already have Medicare health insurance should also consider getting Term Life Insurance, especially if they have dependents. This is because Term Life Insurance provides financial protection for your loved ones when you pass on.
Do I Need Term Life Insurance if I Have Medicaid?
Getting Term Life Insurance in addition to Medicaid can help your family greatly in the event of your death. Additionally, Term Life Insurance does not affect your Medicaid eligibility.
Do I Need Term Life Insurance if I Have no Dependents?
Individuals with no dependents may not need Term Life Insurance because they do not have anyone who will suffer adverse financial effects if they die unexpectedly. However, even if you do not have dependents, someone will need to pay for your funeral and final expenses. Hence, you can consider getting Final Expense (FE) Insurance if you do not qualify for the Term Life Insurance policy. FE is a type of Life insurance designed to cater for end-of-life expenses after the demise of insured.
Do I Need Term Life Insurance if I am Single?
Term Insurance might not be an option for you if you are still single. However, if you are considering getting married or having a child soon, it could be worth getting Term Life Insurance as quickly as possible to lock in a lower rate based on your current health and age. Also, having Term Life Insurance will allow you to save for your funeral and end-of-life expenses.
Do I Need Term Life Insurance if I Have Cancer?
Most Term Life Insurance policies are not available for individuals currently undergoing cancer treatment (at an advanced stage) or if they have only been in remission for a short time. This policy is typically for people with good health, so individuals need to be in remission to qualify. However, policyholders who already have Term Life Insurance coverage before their diagnosis may contact the Texas-based licensed insurance agent who sold them the policy to discuss their options. A cancer patient who does not have an existing Term Life Insurance may also talk to a licensed insurance agent to discuss other life insurance coverage possibilities.
Do you Lose Money with Term Life Insurance?
Since Term Life insurance does not have a cash value component, policyholders who outlive the term of the policy typically lose the spent money because the policy beneficiaries would not get the death benefits.
Does Term Life Insurance Increase with Age?
As insureds get older, Term Life Insurance increases. Typically, your monthly premiums increase as you age, but it is always in a small percentage if you are young, compared to when you are older. For example, on average, your term life insurance quote might increase by 6% if you are between ages 25 and 30, but it can jump much higher, 80-86% if you are between ages 60 and 65.
In Term Life insurance, the monthly premiums remain level (unchanged) until the expiration of the term of the policy. However, the premium will change when the policyholders want to renew it.
Group term life insurance also increases with age. This is a type of term insurance in which one contract is issued to cover multiple people. The ranges that a group coverage may offer involve competitive group pricing. For instance, individuals under 29 can buy a policy worth $50,000 and may be required to pay a premium of about $2.50 monthly. In contrast, individuals within the age range of 50-54 purchasing the same amount of policy may be required to pay about $8.50 as monthly premium. Hence, as you get older, you tend to pay higher premiums than the amount you would if you were in your 20s.
Do I Need Term Life Insurance at 55?
Getting Term Life Insurance at 55 costs significantly more, so it may be unnecessary if you no longer have people who depend on you financially and have enough savings to cover debts or final expenses. However, if you still have dependents at age 55, buying Term Life Insurance can be an option. At age 55, most Texas insurers might not be willing to give you Term Life policy because of your age and possible health conditions. Hence, the best time to get Term Life Insurance is at a young age. As an alternative, you can also consider getting other life insurance policies like Final Expense.
Do I Need Term Life Insurance after 60?
If you are over 60 and do not have issues paying bills, have no outstanding debts, and have a self-sufficient family, you may not need to get Term Life Insurance. However, if you have debts or children or a spouse who still relies on your income at 60 or older, you should consider getting Term Life Insurance. Additionally, while individuals who are 50 years and under can apply for a longer policy term, persons who are 60 years and older may be limited to buying a 10 or 20-year term without the option for a 30-year term.
Is it Better to Buy Term or Whole Life Insurance?
The best type of insurance to purchase largely depends on your coverage needs. For instance, Term Life Insurance would be a better option if you only want affordable life insurance to cover a short-term need. You can also get this policy if you intend to convert it to a permanent life insurance policy in the future, or you do not want to use life insurance as an investment vehicle.
In contrast, Whole Life Insurance will be a better option if you can afford higher premiums, want life insurance that accumulates guaranteed cash value, and have a lifelong dependent like a child with disabilities. It is advisable to always speak to a knowledgeable Texas-based licensed insurance agent who can help you compare policies before committing to a coverage option. Policyholders who need lifelong coverage but want more investment options in their life insurance than what Whole Life and Term Life Insurance provides should consider other types of permanent life insurance, for example the Indexed Universal Life Insurance (IUL).
When Does Term Life Insurance Coverage Begin?
Term Life Insurance has no waiting period. Coverage typically begins immediately when the policy is approved and the premium is received.
Who Can Get Term Life Insurance in Texas?
Individuals who have people who depend on them financially, like a partner, children, or aging relatives, can get Term Life Insurance in Texas. Additionally, individuals with mortgages, loans, debts, or a few years away from retirement can get Term Life Insurance. Term Life Insurance policy is also a good fit for parents, primary wage earners, or others looking to cover financial responsibilities for a specific period. You can contact a Texas-licensed insurance agent for detailed information regarding your eligibility for Term Life Insurance.
Who Qualifies for Term Life Insurance?
Anyone who wants to cover financial obligations associated with raising a family after they die qualifies for Term Life Insurance. However, the cost or premium level can vary greatly based on age, health, and lifestyle factors. For instance individuals who are above 50 may pay higher premiums and might find it very difficult to get Term Life Coverage. The better fitting insurance policy for individuals at this age might be guaranteed issue Final Expense life insurance. This policy is for older adults between ages 50 and 80 who want cover for funeral costs and other final expenses after their demise.
Who Needs Term Life Insurance?
People who need to provide financial security for loved ones like spouses, children, or other family members after their demise need Term Life Insurance. The policy’s death benefits can help beneficiaries cover the funeral and other final expenses of the deceased, college fees for children, pay off a mortgage, or help fund retirement of the surviving spouse. However, Term Life Insurance may not be suitable for individuals who need life insurance with cash value and extensive living benefits.
Make sure to discuss your needs with an experienced and knowledgeable state-licensed life insurance professional with access to multiple insurers and plans.
Who Should Get Term Life Insurance?
You should get Term Life Insurance in Texas if you have people who rely on you financially or have a debt that outweighs your assets. However, it is recommended that you talk to a Texas-based licensed insurance agent to give you more information and clarify any questions you have regarding term insurance.
What are the Benefits of Term Life Insurance in Texas?
Term Life Insurance is an affordable way to help individuals financially protect their loved ones after the insured’s demise. In addition, this policy is easy to understand, flexible, and a very good option if you want coverage for a specific period, such as when raising a family. Policyholders also have the liberty to convert to a permanent life policy or renew without having to take a medical exam.
There is a wide array of Term Insurance plans that are available on the Texas market with various benefits. Contact a Texas-licensed insurance agent to guide you in choosing the term life insurance plan that best fits your needs.
PROs and CONs of Term Life Insurance in Texas
The following are the pros and cons of Term Life Insurance in Texas:
PROs of Term Life Insurance
There are several advantages of having Term Life Insurance:
Term Life Insurance is easy to understand. It is a pure life insurance product that provides a death benefit when you die within the policy term, as long as premiums are paid.
It is the best option for most because it offers extensive coverage at a low rate.
Death benefit proceeds are tax-free, so your beneficiary can keep the total amount to use as they wish. They can use the money to pay living expenses like mortgage or rent, fund college costs, cover the cost of funeral arrangements, cover unpaid medical bills
Term insurance offers flexible payment and policy options. Policyholders can choose to pay their premiums monthly, quarterly, semi-annually, or annually.
Individuals can decide to cancel their term policy while still active without incurring any fees or penalties.
CONs of Term Life Insurance
Despite the benefits of Term Life Insurance, it also has some downsides:
Term life may not be the best option for everyone because it only offers temporary coverage.
Term Life Insurance does not build cash value. This means that it does not have a savings account against which you can borrow or withdraw.
As a pure life insurance product, Term Life insurance usually does not offer the insured the Living benefits that are available with most cash value life insurance plans.
If a Term Life policy is canceled, there is usually no refund policy in place unless you renew it based on your current age and health, which comes with higher cost implications.
Individuals with significant health issues may not qualify for Term Life Insurance.
Term Life has an upper age limit. Most times, the maximum age limit varies based on the insurance company and policy term. Individuals who are 50 years and under can apply for a longer policy term, while persons who are 60 years and older may be limited to buying a 10 or 20-year term without the option for a 30-year term.
Beneficiaries cannot receive death benefits if the policyholder dies after the policy expires.
Is Term Life Insurance Worth Buying in Texas?
Yes, it is, especially if you have loved ones who rely on you financially. Term Life Insurance provides coverage and can serve as a financial buffer for your family when they need it the most. Contact a Texas-based insurance agent to learn more about how Term Life Insurance can benefit your family.
What Happens if you Don’t Have Term Life Insurance?
Over 45% of Americans die with less than $10,000 in savings, which means that dying without any life insurance (including Term Life), may leave your family in a financial turmoil. At the very least, someone would be expected to pay for your funeral and to figure out a way to afford it. Additionally, they may have to settle your other final expenses, such as medical bills and taxes.
Why is Term Life Insurance Important?
Term Life Insurance is important because it can serve as a financial relief to your loved ones if you die while the policy is still active. This type of insurance is suitable for low-income earners, debtors, dependents, or individuals on the threshold of new careers or business ventures. Additionally, employers can get term life insurance for their employees as a welfare measure. The death benefit that comes from the policy can be used for many purposes, including paying a mortgage, funeral costs, medical bills, living expenses, and funding tuition fees.
What Happens When your Term Insurance Lapses?
Most times, when you miss premium payments, your Term Life Insurance will lapse. However, there is usually a grace period after the premium's due date for you to make the necessary payments. If the payment is not made within the grace period, the policy will lapse. This implies that you will no longer have coverage, and your beneficiaries won't get the death benefit if you die during such a period. You can choose to reinstate your lapsed policy based on how long the policy has remained lapsed. However, you may have to pay the overdue premium with interest. Hence, it is essential to prevent your term life insurance plan from lapsing to avoid losing coverage. You can seek advice from your Texas-based licensed insurance agent on how to avoid policy lapses.
