If you have been shopping around for life insurance then you have noticed that most companies market their term life insurance more than any of their other products. Term life insurance is chosen more often than all permanent life insurance products together (whole life and universal life).
Why is this?
Isn’t permanent life insurance better?
In this article we will talk about four reasons why term life insurance is so popular today. We agree that it’s a great choice, and after you are finished reading this blog, you will understand why.
Reasons Term Life is Popular
The most obvious reason why term life insurance is so popular is it’s very affordable premiums. Term life insurance low premiums allow families with tight budgets to be protected and not “insurance poor” at the same time.
A typical term life policy is about 80%-90% cheaper than a whole life policy with the same death protection. This is a significant savings compared to whole life and let’s be honest, premium is the main factor in whether we purchase life insurance or not.
Why would you pay $2,500 a year when you could pay $500 a year for the same $200,000 of death protection?
Term life is an essential planning tool for families whose budget is tight, but want to make sure their loved ones are taken care of.
With term life premiums being so cheap, families can afford a lot more death protection. This is extremely helpful to young families with children just getting started. They need a lot of insurance and a whole policy would just be too much.
Your Needs Change Over Time
Term life insurance tends to flow with the changes in your life better than an whole life policy. Whole life is a permanent policy, which means you have the coverage for life. The death benefit remains level while the premium is guaranteed.
This sounds good, but as you grow, your life and lifestyle changes. When your young your needs are going to be different than when you start that family. If your locked into a whole life policy you lose a lot of flexibility that you would have with a term life policy.
Also with most term life insurance, if you decide later you want that permanent life insurance, their is a guaranteed conversion clause. This clause allows you to convert to a permanent policy without having to qualify again. This is especially useful if health problems arise and your term is near its end.
It’s easier to use term life insurance to adapt to your life goals.
Can Be Used For Temporary Needs
Term life insurance is a great alternative to cover your temporary debts and obligations.
Term life can be earmarked:
- Paying a mortgage off
- Buy/Sell Agreements
- Student Loans
- Personal Loans
Buying a term life policy would remove any financial burdens from these types of debts.
Whole life insurance has always been marketed based on its cash value feature. Some of whole life’s selling points are you can use the cash value to supplement retirement, educate your children, or down payment for a new home. Of course this comes with a price.
If you ever listened to Dave Ramsey or Suze Orman then you have heard the saying “buy term and invest the rest”. The “rest” that they are referring to is the difference between the price of a term and whole life insurance.
As we mentioned before that can be a significant amount. With the invention of the internet, the average investor has become more knowledgeable. With a vast amount of information available at our fingerprints, we have become more confident in our ability to make our own investments.
The reality is, with the savings from purchasing a term policy compared to a whole life policy, investing the difference is a better option. By investing the difference or the “rest”, you are not constrained by a whole life policies withdrawal rules.
If your looking for coverage and not looking to spend a fortune then term life is the answer. Term life can be used to pay off many financial obligations that would otherwise be left to your loved ones to deal with. The flexibility that term life offers makes it one of the most popular life insurance products. While we highly recommend looking at term first, it always smart to do your own research before making any decisions. Working with an experienced agent will help you find what best fits your unique situation. If you have any questions or comment please don’t hesitate to reach out or give us a call.