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Pros and Cons of Term Life Insurance

For most people, we understand the importance of having life insurance. It provides protection for you and your family from unexpected events, allows you to leave a legacy behind for your dependents to protect their standard of living, and provides you with peace of mind knowing that your family’s financial security is ensured. One of the simplest ways to achieve sufficient coverage for yourself would be through term life insurance. Term life insurance provides insurance coverage for death, as well as total and permanent disability and major illnesses in some policies, with coverage lasting for a fixed term or up to a specific age.   One key drawing point for term life insurance is its affordability. It has much lower premiums relative to whole life insurance policies, making it more attractive to individuals seeking high insurance coverage without breaking the bank, such as lower-income individuals and budget-conscious students. Term life insurance can also be purchased easily online, without no underwriting required or the need for medical examinations. Term life insurance also comes in fixed and renewable terms, allowing you to lock in lower premiums or have premiums start low and increase yearly. This makes term life insurance a great starting point for individuals seeking to get basic coverage.   However, a major downside with term life insurance compared to whole life insurance would be the coverage duration and the money you would get back if the policy was surrendered.    Unlike whole life insurance which provides coverage up to the end of life or as long as premiums are still being paid, term life insurance only provides coverage for a fixed period of time. This could potentially be a major downside as selecting the wrong term duration can result in you having insufficient coverage when it is most needed. For example, a 25-year-old working individual takes up a 30-year term life insurance policy, with it expiring when they turn 55 years old. Depending on their situation, they may want to renew the policy to continue getting life insurance coverage. However, depending on their age and health condition, the insurance premiums may be too expensive for them to afford or even consider them “uninsurable”. Hence, choosing the right duration of coverage is of utmost importance.    Another drawback is the lack of cash value for term life insurance. When an insurance policy is surrendered, whole life insurance policyholders may be able to receive cash value and bonuses from the policy if any. However, if a term life insurance policy is surrendered, the policyholder will receive nothing in return as the policy has no cash value. Hence, if you are looking for an insurance policy that can provide both coverage and the potential to grow your money, term life insurance may not be the one for you.   Therefore, before purchasing a term life insurance policy, one needs to consider how long they want coverage for, how much insurance premiums are they able to afford, and do they want insurance solely for protection or for it to be an investment as well. Learn more about insurance here now.