Pros And Cons Of Term Insurance

Updated On Oct 20, 2021

Advantages of Term Life Insurance
Disadvantages of Term Life Insurance
Conclusion

As the name implies, term life insurance provides coverage for a specific time frame and pays a benefit only if you die suddenly during that particular term. Your beneficiaries will receive a set payment (known as the death benefit) as described in your policy. Term periods typically range from 5 to 30 years with 20 years being the most popular term.

This type of insurance can also be referred to as “pure life insurance” since it has no savings component or any other added benefits. In short, it provides a guaranteed death benefit for a given period.

Advantages of Term Life Insurance

Here's a short list of the Advantages of term life insurance policy:

One of the primary benefits of term insurance is its lower initial cost when compared to permanent insurance. The reason it’s cheaper is that, with a term policy, you’re typically just paying for the death benefit, the payment your beneficiaries will receive if you pass away during the term of the policy. With most permanent policies, your rates help fund the death benefit and can build up cash value.
Term insurance is usually a sensible choice for people who are building a family, especially if they’re on a tight budget since it allows them to purchase higher levels of coverage when the need for protection is often greatest.
It’s a good option for addressing requirements that will disappear in time. As an example, if paying for school is a significant financial concern, but you’re confident that you won’t require insurance coverage after the children graduate, then it might make sense to purchase term coverage that’ll get you through the school years. If you are healthy and looking for a fast underwriting decision, you may want to apply for a no-exam term policy.
Since most term life policies offer the conversion benefit, it may appeal to you to buy term because it’s the lowest price right now, and you can convert it later if you choose or need to. So you aren’t really committing to any long-term policy such as your whole life, but you keep the doors open for future needs.
Term coverage is the simplest form of life insurance to understand. We all value something that is simple to understand. For instance, if you bought a 30-year policy when you were 30 years old, you should know it will expire at the age of 60.

Disadvantages of Term Life Insurance

The following is a list of the disadvantages of term insurance:

The specific restricted time frame that term life offers may be an issue for some. The term length is highly related to your current age at the time of the application.
It’s like renting a house or an apartment; there is no cash value to the policy after paying for 20 or 30 years. Many will argue that they can save or invest for themselves and are happy to get rid of it after 30 years.
If you develop some health issues that would keep you from getting new insurance, you will be stuck with the high premiums to pay at the end of the term should you decide to keep it.
The conversion built into many term plans is only allowing you to convert it with the company where you first bought the term policy. So, if you develop any health history, you are at the mercy of the product and services of the same company. If they don’t have a good permanent product, this is your only choice.

Conclusion

Term life insurance is probably the most popular form of protection because of its lowest cost. Whether you buy whole life or term insurance, you will still need to be in great health to get the lowest rates. So, it’s not necessarily the type of plan that you buy but the risk you pose to the insurance carrier that ultimately determines your rates. You can go ahead and run term life insurance rates on this page.