Do You Need Term Life Insurance?

Do you really need term life insurance? Term life insurance can offer your family many benefits. Before you decide on a policy, you should determine your specific needs. Knowing more about this insurance option will help you find an affordable term life insurance plan with the benefits you want for your family.

The Benefits of Term Life Insurance

Term life insurance can be purchased for the specific times in your life when you need some extra insurance. Since you are not expected to keep the policy for your entire life, the they are often cheaper than whole life insurance options because there is a smaller chance that your family will actually need to use them. In comparison to the alternatives, many industry experts argue that whole life policies are not the best investment as the return on investment is very low. Thus it might make more money by investing in the term life policy, as it is cheaper, then use the excess to invest in stocks or a different long term investment.

The Disadvantages of Term Life Insurance

While it is something you buy hoping to never collect on , one of few disadvantages of term life insurance is that you can only get a return on your investment if you die, unlike whole life which gives a return at the end of the policy regardless if the party is living or deceased. Some insurance companies will give you the opportunity to extend the term of coverage, but the rates can become much higher and discourage consumers from continuing their coverage

Who is the Audience for Term Life Insurance?

Term life insurance policies are useful for families that significantly rely on the incomes of one or two people in the household. Typically, couples buy term life insurance when they have children and need to take their financial well being into account. If one of the parents dies before the child is grown, the other will get money from the policy to help raise the child and pay any expenses.

As your children grow up, though, you might not need the extra insurance (although sometimes life insurance for seniors might be necessary). They can take care of themselves, so there is not a reason to continue paying for the term life insurance. Likewise, at this point in your life you are probably more financially secure. If you suddenly died, your spouse might be able to live without your monetary contribution much more easily than when you were younger and had children in the house.

A good place to get started for term life insurance is with MetLife. MetLife has been providing insurance for more than 140 years to millions of consumers worldwide.

As with any investment, it is best to take into account all factors that surround it (including how much life insurance do you need?) to ensure that you will receive adequate coverage for the investment.

Today’s post comes from Barbara Waltz at 247QuoteUS.com:The Smart Insurance Blog. Barbara was kind enough to expound on the benefits or term life insurance, a product Mrs. PT and I are interested in since having our little girl.

Share Button



Last Edited: October 30, 2011 @ 3:23 pm
9 comments
Joe@TLI
Joe@TLI

Yes, whether or not one should have life insurance should definitely be determined on a case by case basis. People need to consider their personal situation and talk to a reputable agent to decide what is the best choice for their specific needs. Generally, if someone has a family, having some type of coverage is better than not having any at all.. but this needs to stay with in the family budget. Thanks for the thoughtful post!

Denise
Denise

There are no doubt a number of factors to keep in mind when choosing a life insurance policy. When faced with the many options available it is easy to get confused and lose sight of the bigger picture. The main reason behind taking out a life insurance policy is to replace the income of the insurer after his or her death. A dependent spouse, young children and even siblings who rely on you financially will not suffer after your demise with the correct insurance plan. Life insurance benefits can be used to cover burial and funeral expenses, debt and medical bills and estate taxes. Your beneficiaries can benefit from the inheritance of your life insurance policy benefits. Insurances such as whole life and universal life insurance with a cash value component can even be used as a mode of savings as this element can be withdrawn or borrowed on request. Insurance here acts as an enforced savings plan and is imperative for anyone who recognizes the importance of planning for the future.

Denise at AccuQuote

TStrump
TStrump

While I don't have any people that really depend on my and my accounts are in order, I still have term insurance.
I think if something ever happened to me, I like the idea of giving my remaining family members a 'gift' to make their lives easier.

PT
PT

More places to get quotes (recommended by Liz Weston):

Term4Sale.com
Insure.com
Ameritas.com (Direct)

PT
PT

@Mr Plasectomy - I did a roundup of opinions on life insurance a couple of weeks ago (http://ptmoney.com/life-insurance-when-and-where-to-get-it/). Some of the places they mentioned they purchased insurance were:

AccuQuote.com
SelectQuote
Netquote.com
USAA
Chastainotis.com
InsureMe.com
Prudential
State Farm
AIG
Farmers
AllState

I would also add:

Your Employer
Your Professional Organizations

As for the differentiator, I don't know. I'm assuming some of the quotes may have you coming in as a superman, while others actually factored in your health. Some low ball, while others take the high road.

I suspect a quick email to the folks at Zander might clear it up.

PT
PT

@Weakonomist - I would hesitate to say that they "always" do this. Insurance products, like any other financial product can be used for both positive and negative means. I definitely get your point though about the sales spin and the commissions.

Whole has it's place for some people though. It's there b/c consumers demanded it.

The reference to investment doesn't offend me. I can see how some people might be offended though.

Mr Plasectomy
Mr Plasectomy

We have three small children and my wife is a stay at home mom. Term life insurance is extremely important to us as she is spending these years raising our children and not working. It is difficult enough living on one income and I cannot imagine leaving my family with nothing if something were to happen. That said we still do not have it.

When shopping for insurance who do you know to go with with all the different providers out there? Running a quick quote at zander insurance provides a comprehensive list of companies with rates ranging from $400-1200 a year for the same coverage? What is the differentiator in price?

The Weakonomist
The Weakonomist

I agree with the first commenter. Insurance is not an investment and if you die that is not a return on investment. This post is a bit offensive in that right.

Insurance salesmen always call insurance an investment to get you to buy whole life because they make more money off the commission. If whole and term were the same premium or comparable this would be a different story, but term is just a no brainer at todays rates.

BeThisWay
BeThisWay

This is a decent explanation, but I have one problem with it. Life insurance and investment should never be used in the same context buy an insurance professional. It's misleading, in my opinion. Term insurance is NEVER an investment - it's renting insurance. In most cases you don't build a cash value,so the only chance of a return is death.

I'm not saying that term is a bad idea - it isn't at all! It's a terrific product, and when I was an agent I always recommended a small whole life policy (because the premiums never go up so you can afford it later in life if you have to drop the term because the premiums will become VERY high. We all know that you may NOT be more financially coomfortable later!) supplemented by term with a large death benefit that is much more affordable, and much more needed when you have kids and a mortgage.

I took out a small whole life policy that is only payable for 10 years, then it's paid up forever. That is supplemented with term. I know it's possible to get a better return on my money with an investment, but today's economy is making me feel pretty happy with the choice I made.