Finance

Term Life Insurance: 3 Reasons to Get This Insurance Plan

One common misconception about term life insurance is that it’s not a good insurance option. The reason being that most people dislike that it provides coverage for a fixed term and has an expiration date.

The truth is, term plans aren’t subpar to whole life plans. Term insurance can likewise protect your loved ones. The people you have left behind could use the policy’s death benefit in many ways, including:

  • pay medical bills and other expenses
  • provide basic needs to the family
  • fund your child’s college tuition
  • pay outstanding debts
  • replace lost income

Here are the three advantages of getting term life insurance:

  1. Lower Premiums

Compared to whole life insurance plans, term policies offer an affordable form of coverage. It’s typically less expensive since it provides you and your family with insurance protection for a specific period.

A term plan serves its purpose for a predetermined time—10, 15, 20, or 30 years. You can renew it after it ends and it gets recalculated according to your age, life’s expectancy and health. You can also buy a critical illness rider to get extra protection against severe medical conditions.

Term life insurance is also less expensive because it has no cash value or savings element. Its sole mission is to pay a specific death benefit in cash to someone (your beneficiary) upon your death.

Because term plans have lower premiums, younger clients can afford an insurance product that may protect their family in times of unexpected events. AXA Term Protector, for example, offers flexible options and provides clients with a big protection coverage for as little as 75 cents a day.

With the small monthly premium, you can rest easy that your savings stays untouched when medical emergencies arise and manage to spend on things you need and pay for other expenses without falling into debt.

  1. High Death Benefit 

Did you know that term life policies have high death benefits? Your beneficiaries may receive large death pay-outs, which will be enough to cover many of your obligations and secure the financial health of your entire family.

If you’re wondering how that’s possible, let’s go back to the main point of term life insurance—provide guaranteed death benefit for a specified term without a savings/investment component

Term plans are specifically designed to cover the policyholder’s death within the stated term period. This means life insurers don’t get a small chunk of money from your funds to invest in a collection of assets and build cash value. 

Come to think of it, you get insured for a low monthly premium and a high death benefit. That’s not too bad for temporary or specified coverage.

  1. Renewal/Conversion Option

Just like many other things, term plans also have a disadvantage. There wouldn’t be a pay-out once the policy expires. The money you have put in will stay with the insurance company if you live past your policy’s expiration date.  

Here’s the good news, though. You may escape this troublesome path by doing one of these two options—renew your term plan or convert it to a whole plan. 

You may renew your term policy at the end of its term to keep your insurance in force. Most term policies have a renewability feature that lets you extend your coverage. However, your monthly premium may increase each time you renew because it will be recalculated for your age at the time of renewal.

If your term life insurance includes a conversion rider, converting to a whole life policy is another option. Such rider guarantees the right to convert an in-force term policy without restrictions and maintains the original health rating of the term policy upon conversion.

Like the renewal option, the insurance company may change the premium of your new policy based on your age at the time of conversion.

 

The Takeaway

There are two major types of life insurance plans—term and whole life. While both promise financial protection against natural or accidental death, the two have their own advantages.

Term life insurance, in particular, is less expensive and may have a higher death benefit because of the absences of the cash value component. It’s also designed for flexibility; it can provide coverage for a specific term (10, 15, 20, and 30 years) and can be extended or converted to a permanent policy.

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