If you’re like most people, life insurance is one those grown-up to-do’s that never quite makes it to the top of your list. You assume that because it’s so important, it must also be complicated, time consuming, and expensive. Au contraire, friend! There is a simple and surprisingly affordable solution to help protect the financial future of the people you love: term life insurance. In this article, we’ll discuss term life insurance pros and cons.
What Is Term Life Insurance?
First, let’s zoom out. You know what life insurance is — it’s essentially a contract between an insurance company and their policyholders (that’s you!) that says if you were to pass away, the insurance company will pay out an agreed-upon death benefit to your chosen beneficiaries (like a spouse, partner, or children). It’s something that can help you feel like you’ve got a plan in place for your loved ones should you pass away. Talk about peace of mind!
As you’ve no doubt figured out by now, there different term insurance options out there. If affordability and convenience are important to you, term life insurance is a great place to start looking. Simply put, a term life insurance policy covers you for a chosen period of time, typically with ten, fifteen, twenty, twenty-five, and even thirty-year coverage options. Those periods of time can possibly coincide with financial obligations like the length of a mortgage or the time it’ll take your kids to reach independence.
How Does Term Life Insurance Work?
Here are three components of term life insurance to consider:
First, you pick a specific time period, usually between ten and thirty years. A ten-year term life insurance policy means you’re covered for ten years. Twenty-year term for twenty years, and so forth. With some policies, your term length is fixed and unchangeable, while some other products offer the flexibility to alter your term at any time. The latter is referred to as convertible term life insurance.
The Death Benefit
Next, you pick a coverage amount. This is the death benefit—the amount your beneficiary (or beneficiaries) would receive if you were to pass away within the term of your policy. For example, Bestow offers term life insurance coverage between $50,000 and $1,500,000.
The premium is the amount you pay for the coverage. Once you buy your term life policy, your premium remains the same throughout the term. So when you hear insurance folks whispering the familiar refrain of “lock in your rate today,” that’s what they’re talking about.
Life insurance premiums might be more affordable than you think. If you’re wondering what your rates might be, get a quick quote here (like thirty seconds quick).
Types of Term Life Insurance
Let’s explore the different types of term life insurance:
Level Non-Renewable Term Life Insurance
The premiums of level non-renewable term life insurance policies are unchanging. You lock in your rates, select your death benefit, and the length of your term at the time of purchase. If you pay your premium, your policy stays in force for the entire term (typically ten to thirty years).
If you are alive at the end of your policy’s term, your coverage also ends. If you still need coverage, some insurers offer the option to renew with an adjusted rate, but you can also buy a new policy.
Renewable Term Life Insurance
The name says it all: a renewable term life insurance policy can be renewed at the end of the term. You pick a death benefit and a term length, and when the term ends, you can renew the term policy without the need for new life insurance underwriting. The renewal term can be annual or based on the initial number of years of coverage you purchased — for example, if you were to purchase a ten-year renewable policy, you could then renew it for ten more years.
With renewable term life insurance, the monthly premium will be adjusted based on your attained age at renewal.
Decreasing Term Policies
With this type of term life insurance policy, the death benefit decreases by a predetermined amount each year of the term policy while the premiums stay the same. This might be a great fit if you have a mortgage and are looking to protect your loved ones from bearing the burden of house payments if you were to pass away, but it may not be the best option for people with dependents and debt.
Pros and Cons of Term Life Insurance
Here is a snapshot of some of the pros and potential cons of term life insurance:
|√||Generally less expensive than some other forms of life insurance|
|√||Term-lengths offer options to fit many different needs and financial situations|
|√||Level premiums means the rate you pay is locked in for the entire policy term|
|X||Does not accumulate cash value|
|X||Death benefit is not permanent (once the policy expires, so does coverage)|
Other Types of Life Insurance vs. Term Life Insurance
While this article focuses specifically on term life insurance, it’s also important you know what else is out there. A permanent life insurance policy (either universal or whole life) offers coverage without terms.
|Type Of Policy||Policy Length||Summary|
|Term Life Insurance||Generally between five to thirty years||
|Whole Life Insurance||Entire life||
|Universal Life Insurance||Entire life||
Bestow Makes Applying for Term Life Insurance Easy
If you feel ready to take the next step and apply for coverage, Bestow makes the whole process a piece of cake. The application is all online and it takes as little as 5 minutes, with no medical exams, blood tests, or waiting periods. In just a few minutes you could qualify for up to $1.5 million in coverage, with rates starting from just $11/mo. Start with an instant quote today. If you like what you see, finish applying and you could have coverage today, if approved!