November 26th, 2018 | Updated on December 8th, 2023
Everyone talks about it, but is term life insurance worth it? Read on to learn why you should buy it.
Americans have a lot on our plates these days — especially when it comes to insurance. Between searching for car insurance, health insurance, homeowners insurance — we’re all insuranced out.
So, when someone brings up term life insurance, our first reaction is usually, “Another policy? Another bill? No thanks!”
Really, is term life insurance worth it, anyway?
We’re going to answer that question in the post below.
What Is Term Life Insurance?
When it comes to life insurance, there are two main types: term and whole.
Whole life insurance gives lifelong coverage. There’s an investment component to it as well, called the policy’s cash value. It’s complex and a very expensive option.
The term life insurance definition states that it’s simply a life insurance policy that lasts for a specific period of time. What that means is that you buy this policy to provide for your dependents in the event you die unexpectedly.
The policy can last 10, 20, or 30 years. It’s also the more affordable option of the two types of life insurance policies.
With whole life insurance, you do get more options. Hence, why it’s more expensive. But, there are many benefits that will help you determine “is term life insurance worth it?”
1. It’s Versatile
An important thing to keep in mind is that just because a term life policy is for 10-30 years, doesn’t mean it actually expires.
In other words, say you’ve reached the end of your 30-year policy. Congrats you outlived in! But, you don’t get that money cashed out to you in a big, fat cheque.
What does “expire” is the low rate you pay on it. So, if you wanted to continue the policy, you can. Usually, you do this on a year-to-year basis until you reach 95 years old.
You can also choose to convert it to a whole life policy. Of course, you’ll pay more, but you’re going to end up doing that anyway. Don’t panic, though, the cost won’t be astronomical.
Another aspect of its versatility is that you can set your own goals for what you want covered. You can even tailor it to specify monetary amounts for different goals.
2. Provide Financial Support
One of the biggest benefits its the comfort of knowing your loved ones will have money to survive financially. You’ll set up the amount of coverage, based on what you feel your family would need.
They’re able to make repairs on the home or anything else that arises in an emergency situation. Your spouse can set the money aside in a savings account and draw as they need.
3. Pay Off A Mortgage
Paying a mortgage when there’s a loss of income is stressful. With a term life policy, your surviving spouse won’t have to decide between feeding your children or keeping a roof over their heads.
4. Pay College Tuition
If you have small children, you may want to sit down for this one. The average cost of college tuition is close to $9,000 for an in-state public university. A private college will cost close to $35,000 per year.
Those figures don’t include room and board, books, transportation, etc. You can tack on another $15,000 for those. The costs will continue to rise.
In 10-15 years, who knows how expensive college will be? But, you can choose to cover college expenses in your term life insurance policy, taking another burden off your family.
5. Pay Off Debt
Aside from paying off the mortgage and your children’s education, you can include other debts in your coverage.
Credit cards, liens, car loans, lines of credit — all of these can get taken care of with a term life policy.
6. Provide Money For Moving Expenses
On top of debt, you can also make provisions for moving expenses. Say you and your spouse are from Boston, but your job moved you to California.
Your spouse may decide it’s better to move back East where the rest of your family is. This provision allows them to do this without worrying about selling everything you own to do it.
7. Create A Charitable Donation
Believe it or not, you can actually name a charitable organization as one of your beneficiaries. If you’re involved with a local cause or a religious affiliate, you can ensure the organization of your choosing receives a donation from your policy.
8. It’s Easy To Buy Online
Compared to traditional policies, term life insurance is easy to buy online. This is because the process is faster and simpler than buying whole life insurance.
You won’t need a medical exam and your coverage can start immediately. You just have to choose which goals you want to accomplish and give the carrier your payment information.
9. Pay Your Final Expenses
Finally, the most obvious reason to buy any kind of life insurance: final expenses. The average cost of a funeral is a little over $7,100. A cremation isn’t much better at $6,000.
If you pass away unexpectantly, this can be next to impossible for your surviving spouse to cover. While you may have investments that your beneficiary can cash out, it could take quite a while for them to receive the money.
A term life insurance policy makes the process smoother for the grieving spouse. It’s one less thing they have to worry about during their time of grief.
Is Term Life Insurance Worth It?
So, is term life insurance worth it? It certainly is! Especially if you’re young and have children.
Your dependants will have a safety net that will provide basic necessities for them to be able to carry on without the worry of how they’ll pay for it.
The biggest downside is that you can’t withdraw money from a term life policy the way you can with whole life insurance. But, there are other ways to have extra money in your pocket.
If you’d like tips on having money now (while you can still enjoy it!), check out these tips for saving money every month.