Buying Term Life Insurance

There are obvious reasons to purchase a life insurance policy such as: providing income for surviving family members, paying off mortgage, or providing for a child’s college education in the event of an untimely demise. What’s not so obvious is whether buying Term Life insurance is the best option for you.

Many people choose to purchase term life insurance over a more traditional whole life insurance policy due to the greater amount of policy face value (benefit coverage amount) compared to the more affordable premium. There is also a limit to the amount of coverage years of a term life insurance policy, typically 10, 20 or 30 years. The longer the length of coverage, the more premium you will pay per month. The limited amount of coverage years allows the insurance companies to pass the risk to the insured. If you do not die within the term selected, the policy is over. All premiums paid for those years are that of the insurance company and no further coverage is provided.

With that said, many companies allow you to convert a term life insurance policy to a whole life insurance policy within so many years, of course at a higher premium. Certain companies will also allow you to renew your policy on an annual basis after the initial term. You must show proof of insurability and premiums will likely be higher, year to year.

Many financial guru’s, such as Dave Ramsey suggest only purchasing Term Life insurance and investing the rest. The basic principal to this logic is by the time your 20-30 year term runs out, you will have enough money (through retirement, investments and savings) to self insure yourself at this point. It’s always a great rule of thumb to research your options when it comes to buying Term Life insurance and to speak with a local life insurance professional.