Term life insurance provides coverage at a fixed premium rate for a limited period of time. This life policy usually offers a death benefit only. In order to qualify for compensation, the policyholder must die within the specified term of the policy. If the beneficiary outlives the contract, it expires and has to be renewed. A term life insurance can be terminated as well if the policyholder defaults on monthly premiums.
Terms for this type of insurance policy can last anywhere between ten to thirty years. However, contracts usually vary and some may be valid for just one year, while others can be as long as forty years. Insurance premiums for this life insurance policy depend on several factors. These include aspects such as age, health status, and if the applicant engages in habits that jeopardize health or general wellbeing.
If you are considering taking out a term life insurance cover, you must be wondering, what benefits does this policy provide? Are there any shortcomings associated with it? To find answers to these questions, read on.
Advantages of Term Insurance
- Term insurance is cost effective compared to other policies such as permanent, whole, universal, and variable universal life insurance. This option is good for you if you are at a time in your life when you need life insurance but have other financial priorities to take care of. For instance, this would be ideal when you are approaching retirement age and you don’t want your kids to suffer when you pass on.
- The good thing with a term life insurance policy is that it is convertible. What this means is that you can switch to a different life policy such as permanent life insurance at any time. The advantage of this is that you can get affordable life insurance at a time when you are financially burdened and then switch to a more comprehensive cover when your finances improve.
Besides being conversant with the advantages of term life insurance, it is equally important to know about the dark sides that come with this insurance policy. So, let’s have a look at the disadvantages of term insurance as well.
Disadvantages of Term Insurance
- The biggest disadvantage of term insurance is that you have to pass on during the life of the policy in order to qualify for benefits. Should you pass on even an hour after the term expires, you will not be compensated.
- With this insurance policy, there is also the risk of ending up with no life insurance at the end of your existing term. This can happen either if you are deemed uninsurable when you attempt to renew the contract, or if you are unable to continue making monthly payments to the insurance company.
Keep in mind that polices for term life insurance are not the same. Since different providers have varying terms and conditions, make sure to read the fine print before putting your signature on the dotted line. In addition, get and compare quotes from various providers in order to find the best premium rates.