Advantages and Disadvantages of Term Life Insurance

Life insurance is far from a one-size-fits all package. It comes in many sizes and shapes, each with advantages and disadvantages. However, there are two general categories that most life insurance policies will fall under: permanent life insurance and term life insurance.

When questioning what insurance to purchase, one of the first consumer questions is usually what is term life insurance, followed by what are the advantages of choosing term life insurance over permanent life insurance?

What Is Term Life Insurance?

Term life insurance provides a pre-set benefit protection, over a pre-set amount of time (the term of the policy,) and for a pre-set premium rate. In other words, the benefits will only be paid to beneficiaries if the policy holder passes away during the term of the policy and the premiums are paid in full. There are three main types of term life insurance:

Guaranteed Level Term Life Insurance - This is the most common type of term life insurance due to the low cost and long term coverage associated with it. The low premium can be set up to remain for 5 to 30 years, depending on the specific policy.

Return of Premium Term Life Insurance (ROP) - If the insured remains alive, this type of term life insurance policy offers a guaranteed refund of the insurer paid life insurance premiums at the end of the term. It’s more expensive than a guaranteed level, but still less expensive than most permanent life insurance types. These are typically available in 30, 20, or 15-year-terms.

Annually Renewable Term Life Insurance (ART) - This type of term life insurance is generally not very well accepted by consumers, as the premiums increase each year to account for the probability of the insured’s death for that particular year.

What Are Some Advantages Of Term Life Insurance?

*Term life insurance premiums generally cost substantially less than permanent life insurance premiums.
* A higher level of coverage can be afforded vs. permanent life insurance.
* Term life insurance policies can be tailored to cover time-specific needs, such as the life of a mortgage, car loan, or high-risk job.
* Affordable and suffice protection source for premature death events.
* Simple to understand policies- you choose the length of the term and the amount of coverage.

What Are Some Disadvantages Of Term Life Insurance?

*Benefit options are limited
*Most term life insurance renewable policies will have an increased premium each time you choose to renew it.
* Some policies may not be renewable or become to expensive to continue past retirement age.
*Most term life insurance policies do not offer a cash value option and none build a cash value.

The bottom line is that each person searching for term life insurance quotes will have their own unique needs and financial situation to be considered when deciding if term life insurance is a good choice for their insurance coverage.