3 benefits of term life insurance
No matter what stage of life, term insurance can be an important part of your plan. Review some important factors to consider when buying term life.
So, why choose term life insurance? Well, there's a reason term life is one of the more popular types of coverage available. It's a straightforward protection tool that handles core financial needs — think debt, income replacement, final expenses-in the event of a premature death. Who wouldn't want that as a part of their financial arsenal? While that may be a rhetorical question, it does beg for more. Here are three advantages of term life insurance:
1. Term life is less expensive than permanent life insurance.
Want the bottom line up front? Term coverage is wallet friendly. How? Well, term life insurance offers coverage for a specific time-period or to a certain age. This shorter duration makes it a less expensive method of getting more coverage. Especially when comparing to alternative choices like permanent life insurance.
But this can come with a tradeoff. Sometimes term can be so temporary, it's not there when you need it most — during old age. Why would someone spend the money for temporary coverage and receive nothing at the end?
Simply put, term protection acts as leverage when you have temporary needs to cover, like a mortgage. In other words, obligations you have today are less likely to occur in the future. Thus, it provides lower premiums that meet your needs now without breaking your budget. It also allows you to focus on your future financial goals.
2. Term life insurance is flexible.
So, we've established that you may be young, or have a large financial obligation, like school or a mortgage. These stages of life present some challenges. For one, that change is certain. With change comes the importance of adaptability.
Whether it's adapting to your career, family dynamics or finances, flexibility is crucial. This is a foundation of level term life insurance.
First, level term provides a variety of coverage periods to meet your needs. These term lengths can last anywhere from 10 to 30 years, depending on age. For example, you may decide to carry a 20-to-25-year level term insurance policy when you have young children. This allows you the protection necessary until they become responsible adults.
After the level coverage period ends, your death benefit and premiums may be subject to change. These changes may not be favorable, so it's important to consider your coverage needs now and into the future.
Second, premium payments can be flexible. Don't want to pay monthly? You can opt for annual premium payments. Need an automatic draft instead of direct billing? No problem. These choices allow you to choose what's best for your circumstance.
Lastly, not all term insurance policies need to be level term. An annual renewable term offers year-to-year protection that comes with annual premium increases. This rise in cost is smaller in nature, with a goal of providing more coverage for less up-front cost. In both contract types, the policy can be canceled at any time.
When you cancel a term insurance policy, be sure to consider the financial needs of your beneficiary. You may no longer see a need for temporary coverage if you're free of mortgage debt or your kids are grown. But if your term policy offers a conversion benefit, you may want to change to a permanent life insurance policy for legacy or final expense needs.
3. Term life is simple.
Financial products can be complex. Even when comparing the few types of life insurance, it can become convoluted, especially when choosing among different companies. That's where the simplicity of term contracts can be appealing. Most insurance companies have similar term offerings.
This can help with comparing premiums, terms of coverage and benefit amounts. Another element to consider when purchasing life insurance is the underwriting process. If you don't know by now, most life insurance requires some form of underwriting, which includes medical exams.
While this may seem daunting, the process can be more convenient than you think. Improvements in technology and process have allowed the industry to advance even further. In fact, some companies now offer basic plans without a medical exam.
Although the advantages are clear, remember, term life may not be for everyone. Consult with one of our life insurance specialists to see if term life insurance can meet your personal needs or for more information visit usaa.com/life.