Term life insurance covers you for a specific period of time (a term) and pays death benefits to your beneficiary only if you die during that term. A term life insurance policy can be arranged in yearly increments ranging from one to 30 years.
Advantages of Term Life Insurance
Term life insurance is generally cheaper than permanent or whole life insurance. Your premiums are contributed directly to the death benefit, as opposed to funding a cash value policy, as is the case with a whole life insurance policy.
If you need coverage just to make sure that your kids can get an education, or that your spouse has income to take care of the kids until they reach adulthood, then term insurance is a good idea. A popular term for this kind of insurance for new families is 20 years. This term covers the family from the time the children are born, to the time they are graduating college and about to start their own careers. Insurance needs are the greatest during this period, and term life insurance tends to fit the bill.
Disadvantages of Term Life Insurance
If you reach the end of the term policy and find you still need coverage, purchasing additional term insurance can get expensive. The major contributing factors in pricing insurance are age and health. As such, renewing or extending a similar policy later in life will likely cost you much more money than your original policy. Additionally, you will need another physical exam to confirm your health status. If you have been riddled with medical problems since obtaining your first policy, you may find it hard to extend or purchase a new policy when the initial term policy runs out.
Another disadvantage of term life insurance is that the policy does not build up cash value. When the policy is over, there is no reimbursement of funds paid in through the premiums. Policy holders can’t borrow against a term life policy.
For those who think they may need coverage for a longer period of time or coverage throughout their entire life, permanent or whole life insurance may be a better option.
Special Provisions of Term Life Insurance Policies
Some policies allow you to convert your term life insurance into a permanent life insurance policy if your needs change. While some states only allow this to be done in the first few years of the policy, others allow the change during any point of time. This is a great option for people who need coverage to extend past the time when their term life insurance policy would normally run out.
If you are planning to purchase term insurance for a short period of time, make sure the insurance company you are buying from also offers permanent or whole life insurance so that you can convert if necessary.
Contact us to see if you can save money on your insurance by speaking to a professional independent insurance agent at Journey Insurance.
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Journey Insurance Agency * Irvine, California * 888.323.7480
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