What are the pros and cons of term life insurance?

life insurance

Consider term life Insurance to be a fee that you must pay when you have responsibilities, similar to taking the commuter train to work. You have a job that requires dependable transportation. You pay a fee to take the train to work so that you can earn money. Furthermore, you are aware that the transportation fee will never be reimbursed, but you need to get to work and are willing to pay it.

The cost of a term life Insurance policy is a fee you pay to life insurance companies in Canada when you realize you have financial obligations and are willing to open a policy to protect your loved ones. Here are the benefits and drawbacks of term life insurance to help you decide which is best for you.

Pros

1.    Simple to comprehend

Term life insurance is one of the most basic types of life insurance. If you continue to pay the premium, your policy will remain in effect for the term period you selected. If you die during the policy’s term period, your beneficiary will receive the death benefit proceeds. On the other hand, if you are still living at the end of your policy term, one of five things can happen:

  • You may re-enter a new term policy with the same company (subject to their rules), with a premium increase based on your current age and health status. If you do not meet the requirements, you will be denied a re-entry policy.
  • You can renew your current policy with the same company (subject to their rules) and pay a much higher premium that will increase every year after that. There is no need for a health exam or questionnaire for this.
  • You can convert your current term life Insurance policy to a Permanent Life Insurance policy with the same company at a much higher premium (if available and subject to their rules). There is no need for a health exam or questionnaire for this.
  • You can change your current term life Insurance policy for one from a different company (subject to their rules). If you are eligible, your premium will be determined by your age and health status at the time.
  • Your term life insurance policy will come to an end, meaning that you and your beneficiaries won’t get any money.

2.    Privilege of Conversion

Many term life insurance policies can be converted to a permanent policy without a new health exam or questionnaire. However, some insurance companies do not provide insurance conversion. This possibility is important to people who develop health problems while insured with a term policy. However, the conversion privilege does not add any cost to your premium.

life insurance policy

 

3.    It is Less Expensive than Most Other Types of Life Insurance Policies

Term life insurance is well-known for its low premiums. It is the least costly type of life insurance.

Cons

1.    Scheduled to Expire

A Term life insurance policy, like a lease, has an expiration date. If you still require life insurance at the time your policy is set to expire, you must select from the list of options described earlier.

2.    Vulnerable To Failure

Term life insurance is the most likely to expire. If you fail to make a single payment, your policy will lapse after a 30-day grace period. Here are a few examples:

  • You relocate and fail to update your address with your life insurance company.
  • You change your bank account but fail to notify your life insurance company.
  • You lose your job and are unable to pay the premium for a few months.
  • Your credit card has been stolen. You cancel it and place an order for a new one. However, you fail to notify the life insurance company.

3.    Cannot be Used as Collateral or as a Loan

A loan application will frequently ask for information about any life insurance policies you own. Lenders want to know if you have an equity-building policy in place. They use this data to assess the risk of lending money to a potential borrower. They may also offer to lend money to a borrower in exchange for the equity in a life insurance policy. Life insurance does not allow you to do it. It is purely defensive in nature.

4.    There is No Equity

You will receive no benefit if you do not die during the term of your policy.

Term life insurance can be an exceptional relief for your relatives if an unexpected event had to occur in your life. Its competitive costs and the fact that it’s easy life insurance are really great. However, there are some counterparts that you have to take into consideration before choosing your policy. We hope these pros and cons helped you in your research.

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