If you’re anything like me, you don’t even want to think about buying life insurance. How do you know you’re buying the right policy? What is term life insurance? Here are the main points you should know about before you buy any term life insurance policy.
What Does Term Life Insurance Mean?
In general, term life insurance is a better choice than whole life insurance. Term life insurance means that you are buying a life insurance policy for a limited period of time at a fixed rate. If you pass away during that time, the policy will pay out to the beneficiary you have chosen. After the original term has passed, you will most likely have to pay a higher fee to keep your coverage or renegotiate the terms of the policy. Term life insurance is generally used to provide a direct cash benefit to beneficiaries in the event of your death.
Why Is Term Life Insurance Better?
It isn’t really a question of better but a question of what fits your needs. When you buy whole life insurance, it can be more expensive because it is generally at a fixed rate for life. Even after paying on whole life insurance for years, if you cancel the money is lost. Having worked as a salesperson myself and for straight commission, I discovered that while salespeople do make a commission on both term and whole life insurance, the difference is that they push whole life insurance because the commission is often bigger and built in without the consumer even knowing. There are term life insurance policies that are level for a period as great as thirty years and very affordable for most people, even daily smokers.
Problems With Term Life Insurance
In my opinion, the biggest problem with term life insurance is that it can expire before you die without being renewed. I had a recent experience that was really frustrating with my insurance company. In 2012 I was diagnosed with cancer and was covered with a term life insurance policy. I was very ill and expected to die. By 2013 I had overcome the threat of immediate death but my policy had expired while I was in the hospital. I wanted to renew my policy but could not do so. Even though I had been diagnosed with cancer while I was covered by my term life insurance policy, I could not renew the policy after it expired because I had cancer. Even if you don’t let the policy expire, as I did, it is still possible that it can reach an expiration date before you die and leave you with no coverage.
It’s important to read the fine print and make sure that your term life policy can be converted to a whole life policy if you choose. Often you will need proof of insurability and if you are diagnosed with a serious condition this can be tricky. Term life insurance can be purchased for a period of one year to thirty years and policies can vary greatly when it comes to renewal.
