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In an era of rising costs, including those for life insurance, many people wonder if term insurance is a good idea. After all, it is the least expensive of all life insurance. And most people recognize that life insurance is a virtual necessity if you want to provide for the needs of your loved ones should you die unexpectedly. It is not too difficult to get life insurance these days, especially term insurance, but there are some things you need to consider before you buy.
First of all, it is important to understand the difference between term insurance and whole life insurance. Term insurance is available only for a set amount of time. You choose whether you want to be covered for 10, 20, 30 or sometimes even 40 years. Your premium is based on how old you are when you buy the coverage, and how long you want the coverage. With whole life coverage, you purchase the insurance and it applies until you die or cancel the policy. With term insurance, the coverage ends at the end of the specified time. If you purchase term insurance for 10 years, and then die six months after the coverage expires, your survivors get nothing. It is the same if you die only one month after the end of coverage. With whole life, there is no time frame in which you must pass on in order for your loved ones to receive benefits.
One of the advantages of term insurance is its low cost. Often, it costs less than half as much per month as whole life insurance. This can be a great benefit to those who must pay the premiums, especially if they are on fixed incomes. Another benefit of term insurance is that you can often be accepted, even if you have a terminal illness, generally poor health, or are elderly. The premium may be higher, but you still have insurance to provide for loved ones. Whole life insurance often rejects those who have the potential to die rather soon, before paying a lifetime's worth of premiums.
The main disadvantage to term insurance is that you pay your premiums for the term and then the insurance ends with the term. No cash value is built. With whole life, cash value can be built that is at least equal to the premiums paid, and sometimes more. Many whole life plans allow you to cash out when you cancel, or want to retire. Term insurance does not such thing. If you cancel before the term is up, you get nothing back. You might as well finish up the term, because some companies have started paying a modest reward if you live to the end of the term insurance policy.
Many people now choose to get both types of insurance, just to make sure they are covered. However, there are those who can benefit especially from term insurance. Those who are elderly or in poor health can benefit, especially if they pick a term they are likely to die within. Also, it ensures some coverage, and the prices are low. When choosing term insurance, make sure you understand fully its pros and cons, and make sure it is right for you.
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