Analyzing the Pros and Cons to Cheap Term Life Insurance

With the aging American population, term life has become more popular than any other type of policy.  Indeed, a cheap term life insurance policy presents several benefits, including affordability, but depending upon your specific situation, there are drawbacks to this form of life insurance.  It’s great for families on a budget, but does it provide the best protection?

Benefits to Term Life Insurance

From being easy on the pocketbook to its convenient management, term life insurance presents several benefits that set it apart from other insurance instruments.

Term life insurance is cheap

One of the most popular forms of protection, term insurance appeals to many people because of its great affordability.  In contrast to whole life insurance, a cheap term life insurance policy can cost three to four times less in annual rates.  Therefore, even for families who are on a budget, you can purchase a term life policy with a substantial payout.

For example, let us presume you are a 50 year old man, who does not smoke and only occasionally drinks.  For a $1,000,000 policy for the next 30 years, a cheap term quote would be only $3,000 annually.  If you were to opt for a whole life policy for the same situation, this could potentially cost $10,000 annually – more than three times the cheap term quote.

Inexpensive term life insurance is easy to manage

Whereas other life insurance policies can become complicated, especially with their annual fees, returns, and investment options, term life insurance is straightforward and simple to manage.  You only need to make the same payment every month, and you will enjoy the same policy benefit.  There are no investment options to choose, performance records to track, or financial advisors to manage.  Thus, if you are not looking to plan your retirement through your life insurance, or if you already have other investment vehicles, then an inexpensive term life insurance policy may be your best option.

Enjoy extra coverage for temporary situations

Because of the simplicity of term life insurance, you can easily find cheap term coverage and buy additional coverage for your family when needed.  For example, if you have young children, or perhaps several children currently attending college, you can increase your life insurance coverage through a term policy.  Or, looking at the long run picture, you may not need life insurance when you are in your 70s or 80s, as your children will no longer be dependents, and your spouse will have a significant nest egg saved.  Thus, a 20 or 30 year term life insurance policy may be all you need in the long run.

Term Life Insurance’s Disadvantages

Akin to any policy, term life also presents its own set of disadvantages.  Depending upon your personal circumstances, some of these disadvantages may not be relevant.  However, understanding the drawbacks can ensure that you make an informed decision about whether you want to obtain the cheapest term life policy available.

There’s no cash value

Unlike other types of life insurance instruments, you do not receive any cash value for your life insurance policy.   Therefore, if you do not pass away within the specified term, or if you cancel your policy, neither you nor your family will see any monetary benefits.  In addition, as there is no cash value, you cannot utilize your term coverage as collateral for loans.

Your coverage is time-sensitive

Term life only covers you for the specified period, and should you wish to renew your policy once the expiration date has arrived, you will likely be faced with higher rates.  The older you get, the more expensive your rates will be.

The Bottom Line

Term insurance is indeed an excellent way to protect your family should the unthinkable occur.  Whereas there are disadvantages, there are significant benefits to term coverage.  If you can pro-actively invest the money you would save between the a cheap term life policy and whole life coverage, your bank account will grow faster in the long run.  Indeed, for most Americans, term life is an intelligent way to protect your family and finances in the future.