Term Life Insurance provides a financial safety net should the family breadwinner suddenly pass away. Paying annual premiums over the duration of a set term (for instance, 10, 20, or 30 years) gives beneficiaries peace of mind that they will be financially supported if tragedy occurs at a time when financial resources may be low. Many people buy term life insurance while they’re still paying off a mortgage, need to replace their income at some level, or cover debt and liabilities.
The relatively low cost is one of the main benefits of Term Life Insurance, making it an attractive alternative to permanent, whole life insurance policies, which never expire but cost five to 15x more.
There are a few factors to consider before deciding whether life insurance with a set term is right for you.
Risk #1: Outliving your term and your family does not receive a death benefit.
Term Life Insurance holds no cash value accumulation, so coverage simply ends once the policy term expires. In other words, if you outlive the term, you won’t get your premiums back and your loved ones will not receive a death benefit. At that point, you could choose to replace your existing Term Life Insurance with a new policy, though the new policy will likely come with costlier premiums because of age and health. One strategy is to use the duration of your term to pay off your debts and save sufficient cash reserves, so you will no longer need insurance protection by the time the term expires.
Risk #2: Paying more for life insurance down the road.
If you’re looking to replace your term life policy, you can expect to pay more for your next term, as the cost of new policy premiums increases exponentially with age. The good news is: your current monthly premium is locked into a set rate until the term expires. You may also be able to convert a Term Life Insurance policy into Permanent Life Insurance later. The people who convert to Permanent or Whole Life Insurance usually have the money to do so and require the death benefit to be there when they pass.
Risk #3: Becoming ineligible for life insurance.
A risk of term life insurance is that once your policy expires, a change in your health could potentially lead to a higher premium for a new policy or even ineligibility. There are some life insurance companies that specialize in issuing policies to people with preexisting medical conditions and there are policies with no underwriting that do not require a health exam. These companies offer life insurance for lower death benefits under $50,000. Most people are still able to obtain some additional coverage if they need but only for death benefits ranging from $5000 to $50,000 and can be expensive.
Risk #4 Going without coverage could put your family at risk.
It’s also important to consider the risk of NOT choosing Term Life Insurance. If Whole Life Insurance is out of your price range, then going without insurance entirely could put your family and loved ones at serious risk if you were to die unexpectedly. It makes sense to lock in a lower-priced monthly premium and retain coverage for a term ranging from 10 to 40 years.
Term life insurance is an affordable way to provide ample financial protection to those who depend on you. Finding the right policy is simple with Insurapply. Get free term life insurance policy quotes in minutes!