Term Life Insurance Articles
Why It's Important To Think Long Term When Buying A Life Insurance Policy
2010-02-05
When buying term life insurance coverage, a person is inevitably thinking about the future. Whether the policy is bought to provide security for loved ones, or to obtain a loan on a piece of property, or simply for any other reason, term life insurance is purchased for one reason. That reason is to cover costs in the event of the policy holder's death. However, sometimes buyers only consider their short-term circumstances when making a purchase. An inexpensive term life insurance policy can be incredibly tempting, but many low-cost plans can end up costing buyers quite a bit in the long run. Any time a term life insurance policy is purchased, the buyer should put a lot of consideration into his or her future circumstances.
The most obvious example of a poorly planned life insurance strategy is the tactic of buying a very short-term policy and renewing it over and over again. Each time the renewal rolls around, term life insurance quotes will be higher because the buyer is older. This can lead to some major issues. When a buyer reaches a certain age, he or she might not be able to find affordable term life insurance (right when it's needed the most). By repeatedly renewing a policy without a level premium, the buyer is backed into a corner, and it can be difficult to obtain a reasonable amount of coverage at a decent price (coverage that would have been available at much lower rates if a longer policy had been purchased).
This does not necessarily mean that buying a longer-term policy is the best course of action. Long-term policies cost more than short-term policies, and although they might be a more financially sound buy, if the policy holder's circumstances change, a 30 year policy might not be as attractive. For instance, if a buyer chose a 30 year policy at the age of 20 but then later had children, the amount of coverage on the policy might be insufficient. That buyer might also wish for a more investment-oriented type of life insurance, such as whole life insurance, but would have to sacrifice the 30 year plan in order to get new coverage. This would mean that the policy holder could have bought a shorter policy, which would have meant lower rates for the same type of coverage.
Talk out a long term plan with your insurance agent before making any purchase. Consider not only the insurance that you want now, but the insurance that you will need in 30 years. Otherwise, the benefits of a term life insurance policy can easily become quite limited.
