About Term Life Insurance
- The primary types of life insurance policies people consider buying are term life and whole life. Whole life policies are more expensive but build cash value over the years. The policy will stay with you throughout your entire life and cannot be canceled as long as you continue paying the premiums. Those premiums also will not increase over the life of the policy. With term life insurance, you are covered for only a set amount of time, such as 10 years. You usually can renew the policy until you reach a certain age or unless you develop health problems. Each time you renew, the premiums are likely to increase. Term life policies build no cash value.
- Although term life policies as described above may seem like a poor choice compared to whole life policies, there are a number of reasons for choosing them. For one, you may not need a full medical examination to qualify. In most cases, you will be asked only a few questions about your health. Another reason is that term life policies are more affordable, so you can purchase a larger amount of insurance than you could with a whole life policy.
- Besides the lower cost, term life insurance also offers other benefits. Because most people qualify for term life while they are still raising a family, these policies offer better coverage when you probably need the money the most. Another benefit is that your policy will include a conversion option. That means at any time before your term life policy expires, you can convert the policy into a whole life plan. That means term life insurance could also be a good way to take some insurance companies for a "test drive" before making a lifetime commitment.
- Some critics of term life insurance argue these policies are basically a waste of money because you are unlikely to need the benefits during the term and receive no cash value for the premiums you pay toward the policy. Plus, the renewable premiums will increase each time, so eventually the affordability of the policies will be reduced. Critics also point out that the conversion option is a nice feature but is generally too costly for most people to take advantage of.
- The best way to determine whether term life insurance is right for you is to talk to your insurance provider. Many of the same companies that handle auto or home insurance also provide life insurance. Discussing your needs and your budget with an agent can help you find out all of the options available to you so you can make the smartest choice for your family. Remember that you may receive a discount on your premiums for buying multiple insurance products through the same company.