Disadvantages Of Term Life Insurance
Term is the cheapest and inexpensive form of life insurance and most people, as long as they have an income, can afford to buy these policies. Even if the person has a large estate, term insurance can guarantee that the estate is not depleted by estate taxes upon the policy holder’s death. Some people may prefer to buy whole life or other permanent types of insurance but the fact is that term insurance is less expensive.
Affordability and Value.
With term life insurance, the policy holder can purchase the amount insurance that is needed without paying more than they can afford. This is especially true when the policy holder is young and needs a great deal of insurance to protect their family. Although the premiums for …show more content…
Term life insurance is a perfect solution for covering temporary obligations. Many people purchase mortgage life insurance which is essentially term life insurance that pays off the policy holder’s home in the event of their death.
Easy to understand.
Unlike whole life insurance and variable life insurance, term insurance is simple. With term life insurance, the policy holder is buying pure death protection without equity. It’s cheap and doesn’t have a lot of complicated variables.
Term life insurance offers guaranteed rates. Depending on the policy holder’s needs, they can “lock-in” rates for 1, 5, 10, 15, 20, 25 or 30 years. These level term life policies are extremely popular. In fact, the policy holder can even get a lifetime guaranteed term …show more content…
Premium payments for term life insurance increase after the initial guarantee period. For example, if the policy holder owns a 10-year level term policy, they can expect a significant increase in their premium after the 10th policy anniversary. Permanent policies cost more than term policies so their choice may depend on how much the policy holder is able, or is willing, to pay for their life insurance.
Cost Prohibitive Over Time.
Term insurance is designed to be temporary and therefore will become cost prohibitive at some point. If the policy holder need life insurance that extends beyond their life expectancy, term life is not the way to go.
Not Designed to Last a Lifetime.
Because premiums increase and eventually become cost prohibitive, the policy holder may not be able to afford to keep their term policy. In fact, a great majority of people that buy term life insurance end up outliving the coverage and drop it because of the costs.