Term life insurance one of the most popular life insurance products. Some may mistake this popularity as a way to manipulate consumer decisions, due to the chance that other types may be marginalized. In truth, there are plenty of reasons for highlighting term life insurance online.

This article will discuss why people buy term life insurance, what it is, and how to compare term life insurance with other life insurance products available.

The ease of Term Life Insurance

It's easy to understand, purchase, and maintain. Much like the “set it and forget it” motto.

Term insurance is what comes to most customers’ minds when envisioning life insurance:  the policy costs a fixed amount, at fixed intervals, for a fixed period of coverage.  If the insured passes away during the coverage period, a benefit is paid, and the policy terminates after it is paid.  If no death occurs, no benefit is issued and it terminates after the policy end date.

A majority of agency websites allow customers to purchase their term life insurance policies online.  These websites will more than likely also permit shoppers to compare quotes for term life insurance online.  The only part you really need to focus on is determining how much life insurance coverage you will need.

 A term policy requires the owners pay a fixed premium at fixed intervals; every premium is the same amount and every interval is of the same length of time.  When compared to other policy options, term life is by far the simplest. For example, universal life insurance requires the policyholder to keep track of a cash value amount of their policy and the charges that will be put against it. By doing this the policyholder will ensure that the policy will not lapse, but if close attention isn’t paid to the policy it can easily terminate itself.  Some other types of whole life insurance have premiums requirements that can vary.

Term life insurance is cheap

When compared with other life insurance products, term life insurance is easily the most affordable option.

One of the reasons of why term insurance is more affordable is because it carries no cash value account.  Both universal life insurance and whole life insurance include a cash value account that the policy owner can use as source of funds.  Premiums contribute to the cash value (not just to coverage) in cash value policies, so the premium amount is required to be larger.  Also, because of the constant maintenance needed  for a cash value account, administration costs will apply to  the cost of the policy.

One of the key reasons term insurance is so affordable is that the insurance company will only have to carry the risk of having to pay out a benefit for 5–30 years, the period term life insurance policies can last. 

When not to buy term life insurance

Although term life insurance is the best bet for simple and affordable coverage, there are some consumer needs that it cannot meet. A life insurance policy can have other uses than simply paying out a benefit. Here are a couple of examples where a different life insurance option may be a better choice.

Protecting an estate from estate taxes. This can be accomplished with a permanent life insurance policy because it is guaranteed to pay a death benefit with no termination dates, as long as the necessary premium payments are made.

Using life insurance to benefit from tax-advantaged interest on investments can be achieved with a cash value (permanent) life insurance.  Variable universal life insurance is the best choice to serve this purpose.

Nonmedical issue life insurance (such as guaranteed issue life insurance) is the best choice for applicants with impaired insurability (e.g. serious health problems). These issues may prevent a consumer from being able to qualify for term life insurance. 

 

Article by WholesaleInsurance.net writer Angela Rosas.

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