Term Life Insurance: The Pros and Cons

05 Apr Term Life Insurance: The Pros and Cons

Term life insurance is a type of life insurance policy that provides coverage for a specific period, typically ranging from 5 to 30 years. Unlike permanent life insurance, term life insurance is designed to provide protection for a set term, after which the policy expires. If the policyholder dies during the term, their beneficiaries will receive a tax-free death benefit.

How Does Term Life Work?

Term life insurance works by providing a death benefit to the policyholder’s beneficiaries if the policyholder dies during the term of the policy. The policyholder pays premiums to the insurance company, and in return, the insurance company provides the death benefit if the policyholder dies. If the policyholder outlives the term of the policy, the coverage ends, and the policyholder doesn’t receive any payout.

Types of Term Life

There are two main types of term life insurance: level-term and decreasing term.

1. Level-term life insurance provides a fixed death benefit throughout the term of the policy. The premiums for level-term insurance remain the same throughout the term of the policy, which can make it easier for the policyholder to budget for the coverage.
2. Decreasing term life insurance provides a death benefit that decreases over time. This type of policy is often used to cover a specific debt, such as a mortgage, that is expected to decrease over time. The premiums for decreasing term insurance may be lower than those for level term insurance.

Pros & Cons of Term Life

Pros:

• Affordable premiums: Term life insurance generally has lower premiums than permanent life insurance.
• Flexibility: Term life insurance policies can be tailored to meet specific needs, such as providing coverage for a specific period.
• Simplicity: Term life insurance policies are relatively simple and straightforward, making them easy to understand.
• Tax-free death benefit: The death benefit from a term life insurance policy is typically tax-free.

Cons:

• No cash value: Unlike permanent life insurance policies, term life insurance policies do not build cash value over time.
• Coverage is limited: Term life insurance policies provide coverage for a specific period, which may not be sufficient for some policyholders.
• Premiums can increase: Some term life insurance policies have premiums that increase over time, which can make them less affordable in the future.
• No payout if policyholder outlives term: If the policyholder outlives the term of the policy, there is no payout from the policy.

How Much Does Term Life Cost?

The cost of term life insurance depends on several factors, including the policyholder’s age, health, and lifestyle. Generally, younger and healthier policyholders will pay lower premiums than older and less healthy policyholders. Other factors that can affect the cost of term life insurance include the term of the policy, the amount of coverage, and the policyholder’s occupation.

Should You Buy Term Life?

Whether you should buy term life insurance depends on your individual needs and circumstances. If you have dependents who rely on your income, term life insurance can provide financial protection for them if you die unexpectedly. Term life insurance can also be a good option if you have a specific debt, such as a mortgage, that you want to ensure is paid off if you die.

Cover Yourself and Your Family with Term-Life Insurance at Kevin S. Dougherty Insurance

If you’re interested in learning more about term life insurance and whether it’s right for you, contact the experienced agents Kevin or Merci today. At Kevin S. Dougherty Insurance, we are committed to helping you find the right policy to meet your needs and budget.