Pros and Cons of Term Life Insurance
Term Life Insurance
Term Life Insurance is a type of life insurance which lasts for a fixed term (hence the name). When that term is up, your coverage expires. This may be contrasted against Permanent or Universal Life Insurance, which provides coverage for the entirety of a person’s lifespan. You can choose terms of 5 years, 10, 15, 30 years. Some life insurance companies offer other term periods. There are pros and cons to securing this type of policy.
Some important advantages include price, availability and simplicity. Because term life insurance policies don’t guarantee a payout for all subscribers (many people pay into a policy but survive the term), insurance companies can afford to offer notably lower premiums. Another important advantage is availability. Signing up for permanent policies can be a long process involving medical examinations, and those found to be sick or at-risk are sometimes denied policy options. This is to make those policies most cost-effective for the providers. Term Life Insurance policies don’t always require these exams; at times, they can be processed in a single day, regardless of health status. This all makes for a much simpler approach to life insurance that is easier on the wallet, on the schedule and easier to keep track of. You just pay your monthly premiums and enjoy the satisfaction of coverage. Term life policies provide higher death benefits for lower premiums.
However, there are notable disadvantages to this type of insurance coverage, including the lack of fixed rates, no cash value and the possibility that you’ll be left without life insurance at the time of death. Every time the policies expire, you qualify for a raise in premium. The older you get the higher the premiums will be. Imagine life insurance expiring at five year intervals, with notable increases at the time of each renewal. The cost effectiveness of a term policy quickly disappears in that scenario. Also, term life policies have no cash value. The only way to get money back from the policy is to die. Unless you buy a return of premium policy. And, perhaps the greatest risk is that the term will end and you will be left uncovered at your passing. Your loved ones will have to find other means to pay for any resultant costs.
Term life insurance has great pros and also some cons. Make sure to evaluate your life insurance needs so you buy the right policy for you. Contact us and speak with a professional life insurance agent to find the right policy at 1-800-363-3311