Term Life Insurance Pros
Term life insurance has several advantages over whole life insurance. These are the reasons why a lot of people choose this over other types of insurance.
- Cheaper Rate. Since term life insurance only covers the specific period that you have enrolled in, it is cheaper than whole life insurance. This is the main reason why a lot of clients prefer this type of policy. It is easier on the pocket allowing even those with average income to afford the coverage. This is a perfect option for those who want to use part of their money for insurance and another part for other things like starting a business.
- More Flexible. Whole life insurance will last until the demise of the policyholder or while the premiums are being paid. With term life insurance, you have the option on the number of years that you want to be covered. You may also have the option to switch to whole life insurance if you decide to. Depending on your requirements, you may choose to purchase a term insurance that will last for a year, 5 years, 10 years, 15 years, 20 years or 30 years.
- Fixed Rate. The premium rate that you will pay within the duration of term life insurance you applied for is fixed. This means that you will be paying the same rate from the start of the application until its end. But note that other term life policies may change rates. Make sure to ask your insurance broker or agent about this before your purchase.
- Tax-Free Face Amount. The death benefits that your beneficiaries will receive at the time of your death will be tax-free. This means that they can have the full amount and use it for their needs instead of being deducted for tax.
Term Life Insurance Cons
Like other types of life insurance, term life also comes with disadvantages. Aside from taking into consideration the advantages, its cons should also be considered. This will help in deciding if this is the right policy for you.
- Coverage Expiration. Since this is a termed policy, the death benefits will only be awarded to your loved ones if you die during the period that it is still active. For example, if you purchase term life insurance for a year, you will be covered for a whole year starting from the date you purchased the policy. However, if you die after the policy has expired, your beneficiaries will not get anything. This is the risk of taking this type of insurance.
- No Cash Value. Whole life insurance has cash value that grows over time. This cash value can be considered as savings as it can be withdrawn in case of emergency. If you withdraw the amount after reaching its maturity, you will not incur any charges. However, withdrawing the cash value before it matures will cost you some extra fees. Term life insurance does not have this. All you can expect is the face amount that your family will get upon your demise.
- Renewal Difficulties. Renewal of term life policy is usually difficult, especially for those that have certain medical conditions and clients who are older. This could leave you without insurance in the end. This is not a problem with whole life insurance, as renewal is not needed for this.
- More Expensive Renewal. If you are able to renew, the premium is usually higher than the previous. With whole life insurance, the rate will be the same until your demise.
Tips on Buying Term Life Insurance
Now that you know the pros and cons of getting a term life policy, you can decide if this is the best option for you. If you are still having difficulties making your decision, you can always get the help of a term life insurance agent or broker. These agents are the experts when it comes to this area. They can help you understand better the policies, as well as assist you with the application. Make sure to shop around before purchasing insurance to ensure that you have the best rate.