Term insurance provides protection. It pays a death benefit if the insured dies during a specific period, providing the premium has been paid. It's like having a place to live for a period of time, providing you pay the rent.

Some term insurance policies can be renewed when you reach the end of a specific period, although the premium rates may increase at each renewal. With other term policies, you must qualify for renewal of your coverage.

Advantages of Term Life Insurance

The initial cost of term insurance is less than that of whole life insurance.

While most term life insurance policies are in effect, you are guaranteed the right to convert them to a permanent policy without evidence of insurability. This means that even if you develop a chronic illness that might ordinarily drive up the cost of a new insurance policy -- or prohibit you from obtaining insurance altogether -- you can still purchase a permanent policy at the cost which would originally be in effect. You are assured of the availability of reasonably priced permanent financial security for your loved ones.

Disadvantages of Term Life Insurance

Like rent payments over time, term payments usually increase. In fact, term premiums increase directly because of your age: at older ages, the cost may become prohibitive because it increases much faster than your income.

As when you rent an apartment, term policies don't build equity. You have nothing to show for the money you put in.

back to top