5 Disadvantages of Term Life Insurance

Understanding the disadvantages of term life insurance helps consumers make the most educated decision. Here are the 5 major disadvantages that should be considered when considering term life:

  1. Term insurance has no tax-free, automatic savings feature as permanent coverage does.
  2. The premiums increase until payment becomes prohibitive at later ages. This is one of the main reasons for the purchase of whole life insurance because coverage is useless if it cannot be held until the date it is needed most.
  3. Term insurance generally has little or no loan values and little or no living benefits.
  4. Term insurance only provides coverage for the term of the contract, not for the insured’s entire life. In other words the term coverage may expire before the need does. A person may become uninsurable at a later age when the need for insurance still exists.
  5. Life insurance of any kind is generally not available to persons in extremely poor health. However, persons in moderately poor health can often obtain insurance at substandard rates (a reference to the insured person’s health, not to the quality or strength of the insurance company), which means higher premiums. It is easier to find ordinary whole life policies than term policies for persons who fall into the substandard rating categories.
Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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