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What You Need to Know About Term Life Insurance

Term life insurance has some distinct advantages over whole life insurance. It does, however, depend on what your needs are and what you are looking for. Here are some things about term life insurance that you need to know to help you buy term life insurance wisely.

Advantages of Term Life Insurance

The advantages of buying term life insurance will probably first be seen in your wallet. It costs much less than whole life to be able to buy the same amount of coverage. This enables you to buy a lot more coverage with term insurance than you ever could with whole life.

Less commissions for the insurance agent is a second factor on your wallet. This is another reason that the insurance is less expensive. In essence, you are buying pure insurance when you buy term insurance, and this gives you the lower price tag.

Disadvantages of Term Life Insurance

One disadvantage to term life insurance is its short duration. Since you can buy term life insurance for only a few years at a time (even for just one year), it does have to be renewed eventually. When you do, you may get a rather good surprise (shock) at the increased price – depending on how old you are when you renew. Once you turn about 55, there is a rather sharp increase in the monthly premium.

Some might think that there is a second disadvantage, but again it depends on how you look at it. With term life insurance, once the policy is ended, there are no benefits. With a whole life policy, however, you may have access to savings (cash value). Of course, if you are able to save, then it would be worth more money to you to invest elsewhere because you get a low interest rate on a whole life insurance policy.

Things to Watch Out for with Term Insurance

Term insurance is clearly the low cost champion on the block. The one thing that you will have to watch for, though, is to make sure that you have a guarantee of both convertibility and of guaranteed renewability. Having both could be very handy one day.

What could happen is that you may get some medical condition that could render you uninsurable. Term life insurance does expire after the deadline. A potential problem is that without a renewability clause the insurer does not have to offer you a new policy – and you may not be able to get it anywhere else.

Convertibility means that you have the right to convert your term life insurance policy into a whole life insurance policy when the policy expires. This turns it into a permanent policy and nothing will be able to cancel it – unless you fail to pay the premiums.

Term life insurance is the ultimate way to go – just make sure that you take the right precautions and make sure that the right words are in the policy. This will enable you to sleep better – and your family, too.