It’s no secret that life insurance isn’t the most comfortable topic to talk about.
However, if you’re a wage-earner in a household with dependents, then you can’t afford to not talk about it.
There are multiple varieties of life insurance to choose from with one of these being term life insurance. You may be wondering, “What is term life insurance? Would it be the best option for my family?”
If that’s you, then keeping reading to get the answers you’re looking for.
What Is Term Life Insurance?
Simply put, term life insurance is a life insurance policy that lasts for a certain number of years.
The length can vary, but some popular term lengths include 10 years, 20 years, and 30 years. IA Excellence is an example of one insurance company that offers multiple term lengths for this type of insurance.
So, why do people decide to purchase term life insurance as compared to whole life insurance (the type that lasts until death)?
Benefits of Term Life Insurance
First off, term life insurance has much lower premiums than whole life insurance. Whole life insurance premiums can be anywhere from 5 to 15 times more expensive than term life insurance premiums.
The premiums for whole life insurance are more expensive because that type of life insurance also functions as an investment account.
Second, term life insurance is much more straightforward than whole life insurance. Its only purpose is to give your beneficiaries death benefits if you die.
Lastly, term life insurance is better for someone who only wants life insurance during particular stages of their life.
For example, new parents may want to buy a term life insurance policy that lasts until their child is independent.
Disadvantages of Term Life Insurance
If you decide that you want to renew your term life insurance policy once it runs out, you’ll most likely be paying higher premiums for the same death benefits because life insurance premiums go up with age.
Term life insurance also doesn’t let you build cash value like a whole life insurance policy would.
With whole life insurance policies, some of your premium is used to build cash value and can accrue interest.
This feature also allows you to take out loans against that cash value (though your death benefit will go down the amount of the loan you take out).
Depending on what you’re looking for in a life insurance policy, this could actually be a disadvantage or a benefit.
Decide If Term Life Insurance Is Right for You
Now that you know the answer to “What is term life insurance?”, you can make a more informed decision for your family. Ultimately, it’s up to you to decide what the best option is based on your unique situation.
If you found this article helpful, be sure to check out more content from the Business & Finance section.