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Life is unpredictable. Even if you’re a super-organizer and planner, surprises will happen.

Some unexpected occurrences are fun and exciting, like winning a contest, and some quickly pull the rug out from under you, such as a sudden death in the family.

There is nothing that you can do to prevent surprises, but you can evaluate risks associated with common unexpected events and make plans to manage them if they occur.

What Is Term Insurance?

When it comes to unexpected occurrences, term life insurance is one of the best risk mitigation tools that you can have. Term life insurance provides financial protection to your beneficiaries (your loved ones) should the insured (you) die prematurely.

Term insurance is the least expensive form of life insurance. It’s designed to last for a specific period of time called a term. If the insured dies within this term (10, 15, 20, 25, 30, or 35 years), the life insurance company pays a lump sum death benefit to the policy’s beneficiaries. This amount is based on your income, but many people can qualify for and afford a $500,000 policy.

» Compare: Term life insurance quotes

Benefits of Term Insurance

  1. Term life insurance is inexpensive. The majority of Americans overestimate by three times how much life insurance costs. However, term life insurance is actually quite affordable and can fit into most budgets.
  2. The death benefit is generally tax-free. The life insurance benefit that your loved ones will receive is tax-free 99% of the time. There are a few situations in which life insurance payouts are taxed.

    » Learn more: How Is Life Insurance Taxed?

  3. Life insurance is exempt from probate. If you die, many assets first go through probate (a court-supervised process) before being passed down to heirs. Probate can be costly and time-consuming. Life insurance death benefits do not go through probate (unless you name your estate or a minor child as your beneficiary) so your beneficiaries will receive the funds much quicker.
  4. Term life can be converted to permanent life insurance for free. Most term policies automatically include a term conversion option at no charge. Down the road, if you decide that you want whole life coverage, you can convert your term policy into a permanent policy without needing to go through underwriting again. This is especially helpful if you have developed a health condition later in life.

    » Learn more: What Is a Term Conversion?

  5. You can receive early benefits if diagnosed with a terminal illness. Most term policies also automatically include an accelerated death benefit rider at no charge. An accelerated death benefit rider allows the policyowner to receive a portion of the death benefit early when the insured individual is diagnosed with a terminal illness resulting in a decreased life expectancy.

    » Learn more: Accelerated Death Benefit Rider: What It Is and Why It’s Free on Most Policies

  6. Your loved ones are financially protected. Term life insurance is income replacement. If you have family who relies on you and you die prematurely without life insurance, what will happen to them? They will struggle emotionally and financially. If you die with life insurance, your loved ones will still grieve, but they can pay the bills, stay in their home, and go to college, for example.

Term Insurance vs. Whole Life Insurance

Term insurance is simple income replacement in the event of an unexpected death. Whole life insurance is designed to last your entire life and accumulate cash value. The type of insurance that is best for you will depend on your circumstances.

For the majority of families, term insurance is a better option because of its affordability and simplicity. However, if you have a need for long-term coverage, for example, if you have a special needs child who may be dependent on you for much of their life, then whole life may be the right choice.

Our Term vs. Whole Life comparison page can help you narrow down which type of life insurance may be best for you.

Why Should You Consider Term Insurance?

Term insurance is inexpensive and protects your loved ones who depend on you. In a world of unexpected occurrences, there are steps you can take to mitigate the risks. Life insurance is one of them.

There are endless risks you could attempt to protect yourself from, but we suggest making it simpler and plan for the 5 Ds:

  • Death
  • Divorce
  • Disaster
  • Disability
  • Debt

Sometimes even the best laid plans don’t work out. Because of this universal truth, although it’s not always fun to think about the what ifs in life, it is important to plan for the unexpected.

The 5 Ds: Death

Term Insurance for Sudden Death

Nothing hits harder than the unexpected death of a loved one. Like most types of insurance, term life insurance is something you never hope to use, but it’s a lifesaver, if needed. If there is anyone who relies on your income for survival (spouse, children, aging parents), then you need life insurance coverage.

Term life insurance is often purchased to cover funeral expenses, mortgage and debt payoff, college education costs, and as income replacement. It’s affordable, customizable, and the best way to plan for one of the biggest what ifs in life.

» Compare: Term life insurance quotes

The 5 Ds: Divorce

Marriage is wonderful. We’re not saying that you should head into your honeymoon thinking you’re going to end up divorcing that person. We hope you and your spouse are together forever; however, in the United States about 40-50 percent of marriages end in divorce.

Just as you don’t plan on getting into an accident when you get into a car, you don’t plan on filing for divorce as you’re walking down the aisle…but everyone buys car insurance just in case.

Having separate bank accounts, writing a prenuptial agreement, and owning trusts are a few ways you can plan ahead to make the event of a divorce easier, should it ever come to that.

Having separate bank accounts ensures both partners remain financially literate and are able to manage money on their own, if need be. Documentation of how finances were maintained is always beneficial as well.

» Learn more: Managing Finances After a Divorce

A prenuptial agreement isn’t just for celebrities. The main reason for establishing a prenup is for protection.

There are many reasons individuals may want to protect themselves: the couple may bring very different amounts of wealth to the union, even if the total is relatively modest.

Or one future spouse may expect to receive a substantial amount through inheritance or a trust distribution. One member of the couple may own all or part of a business, or may anticipate earning a high income once he or she finishes education or training.

All of these factors can affect the decision to pursue a premarital contract.

People can also protect their assets by keeping funds in trusts. Assets placed in a trust established before marriage are typically treated as separate property. Trusts can be very complicated and we highly recommend you work with an attorney to set one up.

Term Insurance and Divorce

Term insurance can satisfy divorce decree requirements. Setting up a life insurance policy on your ex-spouse with you as the policy owner is a great option to protect the income due to you as part of your divorce decree’s provisions regarding alimony and/or child support.

If you believe a divorce is coming be sure to review your life insurance policy. Is your soon-to-be ex-spouse the primary beneficiary? You may want to think about changing that unless your split is amicable and you believe they still have your best interests in mind.

» Learn more: How to Buy Term Life Insurance After a Divorce: What You Need to Know.

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The 5 Ds: Disaster

The word disaster can mean anything. The best way to plan for any type of disaster is to have an emergency fund.

While different insurance plans, such as home insurance, may help in case of a natural disaster, you are going to need funds you can access immediately.

Events like identity theft can cause credit cards to be maxed out and while the credit card companies will work to get your money back, nothing happens instantly. This is another case in which emergency funds will help tide you over.

Even something as simple as your refrigerator breaking while you are on vacation can turn into a disaster.

Financial advisors recommend having enough cash in an emergency fund to cover three to six months’ worth of living expenses.

This number isn’t feasible for everyone. Determine how much money you can reasonably set aside each week and have it automatically deposited into your emergency fund account.

Many employers allow paychecks to be portioned out into different accounts; if your employer does not offer this, you can likely set up these allocations through your bank online.

You’ll rest easier knowing you have some money set aside for those just-in-case situations.

Term Insurance Protects You from Disaster

Term insurance can ensure that there is no financial disaster after the death of a loved one who provides for your family. You may know of someone who died without life insurance (or maybe this has happened in your family) and have seen how devastating the sudden and unexpected death of a breadwinner can be on a family.

If you are ever unsure how devastating the lack of life insurance is, visit GoFundMe. You’ll encounter many people asking for help with the costs of funerals and taking care of their children because a parent suddenly died without any life insurance in place.

The 5 Ds: Disability

According to the Council for Disability Awareness, over 1 in 4 of today’s 20-year-olds will become disabled before they retire and over 37 million Americans are disabled. If you become disabled and can no longer work, not only does income slow (or stop altogether), but expenses may increase due to medical treatments and family needs during your recovery period.

You can ease the loss of income from a disability with disability insurance. Disability insurance helps provide security.

It pays a monthly income to help protect the family home, savings accounts, retirement funds, and other assets should you become disabled.

Term Insurance Allows You to Take Care of Your Family in Case of Disability

When you are shopping for term insurance, some policies allow you to purchase additional perks to add on to the policy. These added on perks are called riders.

A disability income rider is one type of rider. With a disability income rider, if you become disabled, the insurance company will pay you a portion of your policy’s face amount each month.

The 5 Ds: Debt

Debt is scary hole Americans find themselves falling into far too often. The best way to avoid debt is to track your finances and create a budget. Debt starts out small and, if you don’t manage it, it can grow uncontrollably.

They say there is good debt and bad debt. Good debt is the kind that helps you eventually generate income and increases your net worth, such as a college education and real estate.

Bad debt is described as debts incurred to purchase depreciating assets such as the shopping spree you put on your credit card.

With debt in general, it’s advised to pay off debt with the highest interest rates first. Focus on paying a little more on it each month until it’s paid off. Then do the same with the next loan until you have paid your debts.

Term Insurance Protects Your Beneficiaries from Debt

It’s an unfortunate and all too common occurrence—the provider of a family is in an accident or gets critically ill and dies. Without life insurance, the survivors are left behind to somehow find the funds to pay for medical bills, a funeral, and any other debt the deceased may have accumulated.

Oftentimes, families are even forced to sell their home and move elsewhere because the mortgage payment is impossible without the income the deceased provided.

The death benefit a term insurance policy provides can cover bills, a funeral, the mortgage, and even college tuition.

» Learn more: Term Insurance Terminology & FAQs

Risk management may not be fun, but it’s necessary. Start by keeping in mind everything you want to protect—your family, your business, your personal goals—and then think about how the 5 Ds would affect them if any occurred. This should be enough motivation to start planning.

To put an affordable term life policy in place to protect your family from the 5 Ds, start by seeing how affordable your rates could be with Quotacy’s online quoting tool. It takes 5 minutes to go from quote to apply and you don’t need to share your contact info to compare your life insurance rates.

» Calculate: Life insurance needs calculator

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius, CLU

Senior Editor and Life Insurance Expert

Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.