Term Life Insurance Articles
When Term Life Insurance Premiums Do Not Make Financial Sense
2010-07-17
Term life insurance is by far the most popular form of life insurance, and one of the major reasons for this popularity is the low cost of term policies. Insurance companies can afford to give great rates on term policies because their risks are relatively low--they only have to pay out on a policy if the policy holder dies within the term, and if the policy holder survives, they get to keep all of the premiums paid in. Term life insurance is also a competitive market, which leads to low rates, and as such, it's a very valuable type of life insurance policy for nearly every consumer. However, there are some policy holders for whom term life insurance premiums simply don't make financial sense.
This is because premiums are higher when a policy holder has relatively high risks. Older persons, for instance, will pay far more for a term life insurance policy than a younger person. A term policy may still be worth the money for this older buyer, but only if the buyer doesn't have other forms of investments that would cover his or her beneficiaries' expenses after death. Otherwise, the high cost of premiums could eclipse the potential benefits of coverage. The same is true of any policy holder with preexisting illnesses, or a person who works a dangerous job. If a person's risk of dying is relatively high compared to the normal population and that person already has several developed forms of investment, term life insurance premiums may not make financial sense, and it would be unwise to buy a new policy.
Most people don't fall into this group, however, and could use one of the various types of term life insurance to protect investments or to care for a family's financial future. Term life insurance policies aren't intended to be a particularly good form of investment, but they are intended to work well as insurance, and the relatively high payouts of these policies make them very valuable in the right circumstances.
If you're trying to decide whether to buy a term life insurance policy, talk over your decision with a financial planner or a well-rounded insurance agent. Consider all of the different kinds of life insurance, including whole and universal life insurance. What works for one person may not work for another and you should never rush into a life insurance policy. Once you decide to buy a term life insurance policy, look around for the best possible rate and think carefully about the amount of coverage that you buy. You'll avoid making a costly mistake by carefully researching your decision.
