Now that 3 out of 5 Americans have some kind of life insurance, it's obvious that the general public is aware of the value of these policies. However, the type of insurance you choose plays a big role in how much you'll actually get in terms of value from your policy. For most people, term life insurance makes more sense for these seven reasons.
1. Lower Annual Premiums
You'll spend less upfront and as the months pass by choosing a term life insurance policy. This is because the policy has a set expiration date based on the term, which can range from 5 to 40 years on average. The different can be drastic, with many people reporting a cost that is only a few hundred dollars a year for term insurance versus a few thousand a year for a permanent policy. The extra savings can go into your retirement fund or investments to give your loved ones even more financial security if you pass away.
2. Age Flexibility
Term life insurance is ideal if you're older and know you'll spend a lot to qualify for a permanent plan. Permanent life insurance is least expensive when purchased young, so people who wait into their 40s, 50s, and 60s often assume they can't afford a policy. Term life insurance remains financially accessible to people of all ages because it's tied to a specific time period. Older adults can get just the right amount of coverage without having to pay for years of insurance they simply don't need.
3. Reaching Specific Goals
Most family breadwinners, parents, and business owners have a specific financial goal in mind when seeking life insurance. Whether you want to leave money for your children's care or pay off outstanding debts so your family doesn't have to worry about them, these are all goals that can change or go away entirely after a certain amount of time. The built-in deadline on term life insurance at the very least encourages you to assess your family's needs on a regular basis so you're not continuing to pay annual premiums long after the kids are adults and financially secure on their own.
4. Simple Terms
The clear cut policies of a term life insurance policy leave you feeling comfortable with the level of protection you're getting. While permanent life insurance sounds good, it often comes with many more exceptions. It also includes a significant investment component that is far more regulated by federal and state law and more complex to manage over the years of insurance. Unless you're familiar with insurance investment, term life insurance is likely a better fit so you can be sure you know what you're getting and how to make a claim.
5. Faster Quotes
Permanent life insurance is a complex service, so naturally, the insurance providers need quite a bit of information from you before they can offer an accurate quote on a policy that will last decades. Many companies won't even provide a tentative quote until you've completed a physical or at least filled out a medical questionnaire. While this information is also needed for term life insurance, most companies can at least determine an average quote based on your age and a few general medical questions alone.
6. Cover Final Expenses
Concerned with paying for funeral expenses specifically and not much else? Term insurance is great for people who don't need to leave any specific financial contributions to their family but still want to prevent the burden of funeral costs from falling on anyone else. It's easy to get a short term, small scale policy that just covers your chosen memorial and burial arrangements. This is a good option for people with few to no living family members so that arrangements can be made ahead of time and costs covered in advance of a person passing away.
7. Conversion Options
Finally, you're not locked in when you choose a term policy over a permanent one. If you decide you'd like to switch, you can either wait out the term and just choose a different policy then or ask your insurance company for a conversion. Many insurance companies are happy to convert a term life insurance customer over to a permanent policy since it comes with higher premiums.
For best results, check into the options for converting the policy before signing any paperwork. It should be clearly listed whether conversion is allowed or prohibited, and if it's not mentioned, ask the insurance agent or quote provider before starting your policy. Don't forget to check out all the terms regarding cancellation before the term is up as well so you don't run into any unforeseen penalties. In most cases, you should be able to end a policy without penalty but won't receive any of your premiums back.
Life insurance can be an affordable solution that helps protect your loved ones from financial hardship in the event of your death. While everyone has different financial needs and situations, term life insurance is a solution that seems to fit many individual situations. You get coverage when you need it at affordable rates, as well as peace of mind that youâ€™re caring for the people who matter most.