- It’s inexpensive
- You choose how you want your premiums to be structured
- Insurance riders can negate the policy’s common criticisms
Term life insurance is substantially cheaper than whole life insurance. Whole life insurance can cost ten times more in monthly premiums than a term life with the same death benefit. A term life policy will help cover the financial losses that would have a severe impact on dependents, and it’s great for younger individuals with children.
It’s also useful if you temporarily need a life insurance policy on short notice, such as in an event where you would need to procure collateral before taking out a loan.
For an extra fee, you can attach an insurance rider that will protect you from policy rejection when you need to renew.
What Are The Types Of Term Life Policies?
Term life policies come in four main types:
- Level term
- Yearly renewable term (YRT)
- Decreasing term
- Convertible term
Level term policies have fixed premiums and a death benefit that stays the same. Premiums are higher to account for future insurance cost changes.
YRT policies have no specified end date for the policy duration. When you have this policy, there’s no need to prove your insurability when it comes time to renew. However, your premiums will increase as you get older.
Decreasing term policies maintain a fixed premium, with a decreasing death benefit. This policy is typically bought for the purpose of matching the value of one’s mortgage at the time of death when the policy is active. This is ideal if you have dependents who would not be able to cover your mortgage costs if you passed away.
Convertible term life insurance is great for those who know they need a life insurance policy, but are undecided as to whether they should get term or permanent life insurance. It’s also good if you want whole life insurance, but are unable to afford it due to limited income. In this case, the term life insurance allows you to have a policy in place for a minimal cost, and then you can later convert to a whole life policy once you’re able to afford whole life premiums while still being able to live comfortably.