Pros and cons of term life insurance

Pros and cons of term life insurance

November 18, 2016
term life insurance
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Term life insurance is the most well known type of life insurance and one of the most popular. It is the best option for people with temporary insurance needs, such as until their children finish college or when there’s a mortgage to pay off. Many people also opt for it because it’s cheaper than permanent life insurance. But there are also some disadvantages to this type of life insurance. This article takes a look at the pros and cons of term life insurance, to let you know exactly what you’re getting yourself into.

Pros of term life insurance

  • The most important advantage offered by term life insurance is that it’s cheaper than permanent life insurance. Its premiums are the lowest on the life insurance market, and that’s why younger customers love them.
  • Term insurance is also the best solution if your needs will disappear with time, and especially if you need protection for less than 10 years.
  • Another pro is the ability to create individual packages, by combining different types of term life with other types of cash-value life insurance.
  • Death proceeds for term life are not subject to federal income and state inheritance taxes.
  • You can always convert to a permanent policy at any time while your term life policy is in force.
  • Young people can get insurance at very low costs and have the necessary protection even if they become uninsurable.

Cons of term life insurance

  • Although it’s cheap, term life premiums tend to rise as time passes. In later years, the cost can exceed the level premiums of a whole life insurance policy.
  • It only pays benefits if the insured dies. It does not provide any living benefits.
  • Term life doesn’t have a savings feature, like the cash value element offered by permanent life policies.
  • Once the term ends, so does your coverage.

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