"Why Term Life Insurance?"

​For the vast majority of my clients, I tend to recommend Term Life insurance as a base insurance coverage for a couple of reasons… click "read more" below to find out why!

First and foremost, it’s affordable! (Especially compared to other options available such as Universal Life or Whole Life… more on those coverages below). Term Life insurance covers a “term” or period of time, be it 10 years, 20 years, or 30 years at most. Unlike your life insurance coverage at work which gets more expensive every single year you get older, Term Life is sold as a “level premium”, meaning the premium never changes over the length of the term. You are effectively “renting” the insurance coverage for that time period and after the term is over, the policy typically goes away. Prior to the term expiring, most large and reputable insurance companies allow you to “convert” the policy from a term policy into a permanent policy (one that won’t go away) like Universal Life or Whole Life WITHOUT having to show evidence of insurability. This may be a huge advantage down the road if you happen to develop some health issues and need your coverage past the term length. 

So why not just go for a permanent policy from the get-go? Great question, and great idea… in theory. However, let’s get back to the number one advantage of Term Life insurance… it’s cheap! An individual is typically able to purchase hundreds of thousands of dollars more life insurance for up to half or a quarter of the cost (or more!) of a permanent policy. There are a couple of reasons for this - again, with Term Life insurance, the policy will not last forever. The policy also doesn’t build up any “cash-value” or residual value to the policy, unlike a Whole Life policy. Finally, Term Life is sold by many, many carriers which drives costs down and only a small percentage of Term policies actually ever pay out. From an actuarial standpoint (the basis of insurance), the vast majority of people who are approved for a Term policy will outlive that policy… and that’s a good thing! You definitely don’t want to win THAT lottery. 

So why go with Term Life insurance?  Yes, it’s cheap, but most importantly it often covers the leaner years in the life cycle when one has a young family, is still building a career and moving up the ladder, has a larger mortgage or debts to pay off, and is still relatively young and healthy. Folks in their mid 20’s to mid 40’s are typically great candidates for Term Life because they have so many things going on, so many responsibilities, and so little extra cash to spend! If you have a baby and something terrible happened to you, you’d probably want to care for and provide for that child AT LEAST through high school and into college… cue a 20 year term policy! If you buy a house and get a typical 30 year fixed mortgage, you’d probably want to look at purchasing a 30 year term to cover that debt. Substantial and affordable coverage is what Term Life offers, and that’s why I believe it’s the basis of any sound financial plan. 

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