Do You Need Term Life Insurance?

Written By Karrissa Jyles

What Exactly Is Term Life Insurance?

While you’ve heard of life insurance, this usually refers to whole life insurance, which covers the full lifespan of the holder.

With term life insurance (aka pure life insurance), the policy covers the holder for a specific amount of time. Because you can specify the end-date for term life insurance, it’s usually less expensive than whole life insurance as those types don’t expire.

How Does Term Life Insurance Work?

Term life insurance generally covers the holder for a fixed amount of time, from a year and up to 40 years. Just like whole life insurance, holders must pay premiums on term life insurance.

When applying for term life insurance, it’s important to consider how much your family will need (especially if there are any debts or mortgages left behind), and for how long.

The policy value helps to determine what you’ll pay each month in premiums. Your insurance provider will also factor in the following:

  • Time period of the term

  • The holder’s age, gender, career and health conditions (such as medications and lifestyle choices like smoking)

  • Family medical history

Some other options to keep in mind when choosing term life insurance is calculating the number of years you’ll still be paying bills and other expenses (i.e. if you run a small business). 

You would want to purchase an amount that would substantially help your family after you pass away. This is to help provide supplemental income to replace yours, as well as cover any other expenses that you currently handle.

Some term life insurances offer renewal plans where the holder doesn’t have to reapply after the term expires. However, the premiums can increase as the amount is based on your age at the time of the renewal.

Who Should Choose Term Life Insurance?

There are cons and pros to consider as you pick a term life insurance policy best suited for you and your family’s needs.

The cons of term life insurance are:

  • It may be more difficult to qualify if you have any serious health issues.

  • The coverage is temporary and not meant to cover the holder’s entire life.

The pros of term life insurance are:

  • Families can receive higher payouts upon the holder's death.

  • For younger holders, the premiums can be much lower.

When shopping for a policy, you should choose term life insurance if you

  • Need affordable coverage.

  • Want to be able to convert your term life policy into permanent coverage (many term life insurance plans can switch into life insurance plans based on certain deadlines).

  • Need to provide financial protection for your family for a specific amount of time.

Citations:

Karrissa Jyles
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