Term Life Insurance

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Term Life Insurance 2017-05-23T22:16:36+00:00
term life insurance

As the name implies, term life insurance provides coverage for a time frame and pays a benefit only if you were to 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 five years to 30 years, with 20 years being the most popular term. This type of insurance can also be referred to as pure life insurance coverage without anything added. It gives a guaranteed death benefit for a given period.

Advantages of Term Life Insurance

  • One of the primary benefits of term insurance is its lower initial cost when compared to permanent insurance. The reason it’s cheaper because, 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 a 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.

Disadvantages of Term Life Insurance

  • All term policies have a restricted time frame that you can keep them in force. There isn’t any more coverage after the period runs out.
  • There is no cash value available to you should you fall short and struggle to pay your premiums.
  • If you should develop some health issues which would keep you from getting new insurance, you will be stuck with the high premiums to pay.
  • There is often a conversion opportunity built into term coverage. You may be able to convert your term insurance into a permanent one. At the conversion point, you do not need to do a medical evaluation. However, it will be so expensive and unaffordable for some.

What can Term Life Insurance be Used for?

  • Ensure your children are left with funds to help pay for school.
  • Provide required protection as per a divorce agreement.
  • Help your family take care of your final expenses and medical bills.
  • Leave your family with sufficient funds to pay off debts such as a mortgage.
  • Provide required protection as per a divorce agreement.
  • Can be used by businesses for key person insurance or buy/sell agreements.
  • Provide short-term insurance coverage if you’re in between jobs.
  • To replace your income if you were to pass away unexpectedly.