- What situations warrant term life insurance?
- June 15, 2015
In short, term life insurance provides a customer with life insurance coverage for a specific duration of time – typically one, five, 10, 15 or 20 years. If the insurer were to die during the specific period, the insurance company would pay the face amount of the policy. If the insurer does not die within that window of time, nothing is paid to them or their beneficiaries.
There are two key situations that warrant purchasing term life insurance over permanent life insurance, according to McGill’s Life Insurance.
Term life insurance is ideal if the need for protection is purely temporary, or the need for protection is permanent, but the insured cannot afford the premiums associated with permanent life insurance.
If the need for life insurance is in fact purely temporary then term life insurance is ideal. Temporary insurance needs include mortgage or loan protection, young children and/or educational needs.
It is recommended to purchase a term life insurance policy that can either be renewed or converted into a permanent policy. This way an insured can continue to protect their beneficiaries if their insurance changes and they need additional coverage.
If the need for life insurance is truly permanent but the permanent premiums are too expensive, term life insurance can still afford an insured protection. This situation is typically associated with young people just starting out as they may lack the necessary funds to purchase permanent life insurance.
At this age, they can secure lower life insurance premiums because they are younger and most likely are in good health. If they purchase a policy that has a convertibility feature, they can convert their term policy into a permanent policy once they have the necessary funds.
- Category: Articles Library, Life Insurance, Term Life
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