Life Insurance, unfortunately, is not perfect. Every policy – whether it’s term or permanent life has its pros and cons.
Term life may not be right for everyone, but it may be perfect for some. In order to determine this, you have to make sure that the advantages outweigh the disadvantages.
Use the list below to help determine if term life insurance is right for you and your insurance needs.
Advantages of Term Life Insurance
– Premiums are lower than permanent insurance, allowing younger people to buy more coverage when the need for protection is typically greater.
– Term is also useful for insuring specific needs that will disappear in time such as mortgages or loans.
– Mortgage cancellation insurance, for example, is decreasing term coverage, which has a face amount (i.e., insurance amount) roughly equal to the amount of outstanding mortgage. If the insured person dies, the insurance proceeds are used to pay off the mortgage.
– Premiums increase over time, as the insured person grows older. This is also true of level term coverage, at renewal time, the premium goes up and remains level for the next term.
Disadvantages of Term Life Insurance
– Coverage ceases when the term ends. Even when the policy may be renewed for another term, the ever-increasing premium may make coverage too expensive to continue.
– Generally, term policies don’t offer cash value or a reduced paid-up insurance option.
– According to a 1993 Penn State University study, which covered more than 20,000 policies, only one percent resulted in a death claim.
By Tony Steuer, CLU, LA, CPFFE
Tony Steuer is an author and advocate for financial preparedness. Tony Steuer, CLU, LA, CPFFE, helps people make sense of the financial world in a way that’s easy for them to understand. His books including, “GET READY!,” “Insurance Made Easy,” and “Questions and Answers on Life Insurance,” have won numerous awards. Tony is the founder of the GET READY! Initiative which includes the GET READY! financial organization system, the GET READY! Financial Preparedness Club, GET READY! Podcast, and the GET READY! Financial Principles, a best practices playbook for the financial services industry. Tony served as long-term member of the California Department of Insurance Curriculum Board. Tony is regularly featured in the media including the New York Times, the Washington Post, Fast Company, and other media. He has also appeared as a guest on television shows, such as ABC’s “Seven on Your Side.” Visit https://tonysteuer.com/ to join the GET READY! Financial Preparedness Club and access free resources.