On a daily basis you are literally bombarded by advertisements of cheap term life insurance quotes. Oh, that’s right, the ads say life insurance quotes. They conveniently omit the fact that they are term insurance, i.e. temporary insurance. Regardless of age, there is no way you can get hundreds of thousands of dollars of permanent life insurance for $20 per month. You can take a look at some examples of term and permanent coverage below.
There’s Nothing Wrong With Term Life Insurance
Term insurance is cheap, not permanent, but still has its purpose. If you want a simply policy to cover a need, it’s perfect. It offers you high death benefit at low cost and lower related fees. Just don’t make the mistake to think it is forever. It has a finite end date, hence the name term. It can be renewed, but upon renewal, your premiums change. You get older, maybe have some ailments and so on. These factor increase your premiums.
Comparison of Term Life Insurance Quotes
10 Year Term
Now, let’s get to the numbers. Here you see two term life insurance quotes. They are both for a 21 year old male, who has the top health rating. Each company calls the top rating little different. This name is not important for our illustration purposes. In Illustration 1 you can get $500,000 for under $50 per month for 10 years:
As you can see, first year you pay a lower premium, but after that you pay about $40 per month or $485 annually. This type of policy gives you an inexpensive piece of mind. However, keep in mind that after 10 years, that’s it. No more coverage. Policy ends.
30 Year Level Term
This example is a policy, which can be renewed after its term. Illustration 2 is a very long policy, with a level premium for its entire duration. Despite its length, it still has an end to it. Or you can actually renew after the 30 year term, but the premiums start to skyrocket!
So, you are guaranteed to pay $810 per year for 30 years, i.e. to the age of 51. But just take a look at what happens at age 52. Your annual premium is $6,125! By 70 your annual premium becomes $29,750. There are cases, where this could be beneficial to keep renewing such a policy, but not many.
Finding The Balance
If you’re young (under 30), then you may be starting life with some debt, a house, car etc. and a lower income. In that case it is worth it for you to get some term policy, just to get a piece of mind. On the other hand since you are not planning on dying tomorrow, then it is worth it for you to take a look at a life long policy. A so called whole life insurance. This type of insurance is guaranteed to pay out death benefit even after you pay your policy defined premiums.
We discuss the ins and outs of these types of policies in a number of other articles here (category: Whole Life Insurance). These types of policies are not something you see in a TV ad that’s trying to attract your attention with dirt cheap premiums. See for yourself:
In Illustration 3 you can see the premiums are dramatically higher. Guaranteed death benefit is the same, but has potential to grow over time. It is a policy design, where you pay the premiums for 10 years, but remain insured even after the term set for the premiums expires.
Life insurance is an important aspect of your life. It is a long term financial decision. You should always give it more thought than just looking at the lowest premiums. It is best that you discuss it with a professional, who will help you design an optimum solution. We can help you with that. All you have to do to start a conversation with us is to fill out our form here, and we’ll get back to you shortly.