Life insurance is important for everyone but some people may consider it a luxury due to its cost.  That is where term life insurance can be the most helpful.  Whole life insurance policies can be expensive for a family that is living on a tight budget, and it may not be for the important term they need anyway. For those individuals, term life insurance is a much more affordable option and can ensure that all of their life insurance needs are met.

What is Term Life Insurance?

Term life insurance is short term insurance coverage that can be purchased at a fixed rate. A term life insurance policy can run for as little as one year or for as long as forty years. Payments are based on the length of the term selected. Premium payments can either be made in a lump sum or made according to a fixed payment schedule. Term policies pay a certain stated death benefit to the insured if they die with no lapse in coverage.

Term Life Insurance – Primary Advantage

The primary advantage of term life insurance is its low cost. Individuals can purchase policies with large benefits for a relatively small amount of money compared to what other insurance policies normally cost. Term life insurance gives everyone the opportunity to have insurance coverage.

Term Life Insurance – Primary Disadvantage

The biggest disadvantage of term life insurance is that there is no cash surrender value. If the policy lapses or expires before you use it, then all of the premium payments you made could be lost. Although term life insurance is renewable, the premiums get more expensive every year that the policy is renewed. Term life policies can become rather expensive for senior citizens to purchase.

Who Should Purchase Term Life Insurance?

Term life insurance is a good option for a younger person that needs to make sure that their family will be taken care of and that their debts will be covered in the event of death. The death benefit can make sure that a spouse and the children are not left to deal with the financial obligations of the deceased.

Older individuals would be better served by a whole life policy since the cost of term insurance and specific illnesses could make them uninsurable. They would be better off by purchasing a whole life policy in which the payments can be locked in at lower levels.

My Personal Take on Term Life Insurance

Since my husband and I are already saving to have all of our needs covered in our golden years, I think term life insurance is the best idea for us.  We both participate in our employers’ group plans.  This means that our premiums are very low ($2-$5 a paycheck), but we will never see that money again if we don’t die by the time we retire in 25 years.  That’s fine by me.

What type of life insurance do you prefer?  Is term life or whole life a better option for you?



Crystal Stemberger uses Budgeting in the Fun Stuff to write about finding the balance between paying your bills, saving for your future, and budgeting in the fun stuff along the way.