Is Term Life Insurance Worth It?

Term Life Insurance is one of the most popular categories of life insurance. Term Life Insurance offers consumers choice and flexibility regarding the level of coverage provided and the duration of policies. It's also an affordable option, and for some people, Term Life Insurance offers a route into life insurance that they may not otherwise have. So, what exactly is Term Life Insurance, and how does it work?

A Term Life Insurance policy provides coverage within a fixed period of time (referred to as the "term"). If you pass away before the end of the term, your family will receive a payout that they can use to cover end-of-life expenses, pay off outstanding debts and provide financial security for your dependents.

Usually, Term Life Insurance policies offer coverage for terms ranging from10 to 30 years. The policyholder can choose the coverage amount based on their own assessment of their needs and will pay premiums for the duration of the term.

With a Term Life Insurance policy, your financial dependents receive a payout upon your death if you pass away before the term expires. If the term expires before your death, there is no payout. The point of Term Life Insurance is to provide a financial safety net for your dependents if anything happens to you during a your term length. It's up to you to set the duration of that window to ensure that your dependents would not be left financially vulnerable in your absence.

Term Life Insurance vs. Whole Life Insurance: What's The Difference?

As discussed above, a Term Life Insurance policy is an affordable way of providing coverage for a specified period. The insurance company only pays out if you pass away during the term of the coverage. In contrast, Whole Life Insurance can provide coverage for your entire life. Unlike Term Life Insurance, Whole Life Insurance policies provide a cash value that can increase throughout your life. The cash value of these policies can also be leveraged to cover expenses that arise during your lifetime. Of course, with lifetime coverage comes lifetime premiums, and as a result, Whole Life Insurance tends to cost significantly more than a Term Life Insurance policy.

Additional Benefits Of Term Life Insurance That Make It A Smart Purchase

Term Life Insurance is more than just a cost-effective way of insuring yourself and your family. Another advantage of Term Life Insurance is that the costs of a policy are easier to forecast and plan for. Since you know how long your policy will last, you can also calculate how much you will pay in premiums across the policy's lifespan.

Term Life Insurance is also highly customizable. You can tailor various aspects of your policy to suit your own circumstances and preferences, from term length to coverage amount and more. That flexibility is not only an advantage in its own right; it supplements the affordability factor, allowing different customers to purchase within their own comfort zones.

So Who Should Consider Term Life Insurance?

A Term Life Insurance policy could be a suitable option for almost anyone thinking about purchasing life insurance. However, Term Life Insurance is worth particular consideration if you're working with a fairly limited budget, want to limit or predict your total costs, or if your need for life insurance will expire after a certain period of time.

Life insurance can provide a financial safety net, but many people don't need that safety net to remain in place permanently. If this applies to you, Term Life Insurance may be worth considering. For example, you may want a life insurance policy so that you can ensure outstanding mortgage payments will be taken care of with no risk of debts being passed on to your dependents. However, once your mortgage is paid off, that risk vanishes. In this case, Term Life Insurance may be a better option than Whole Life Insurance since you only need to be covered up to the point that you expect your mortgage to be paid off.

Similarly, a Term Life policy can provide a financial safety net if you have young children who cannot provide for themselves. However, once they're fully grown, you can anticipate that your children will be financially independent of you, and you could plan for your Term Life Insurance policy to expire at around this point.

Remember also that not everyone chooses to purchase life insurance. If you have no financial dependents and no debts, you may decide not to purchase life insurance. If you anticipate having a family or taking on debts in the future but don't right now, the question is a little more complicated. If this is you, consider whether you want to save on premiums and postpone getting life insurance until you take on the responsibility of dependents and debts. On the other hand, you may want to take advantage of the lower premiums you'll likely be offered if you sign up for a life insurance policy while you are young and healthy.

How Much Term Life Coverage Should I Buy?

First, identify the major financial responsibilities that you would wish to be covered in the event of your death. Once you've done that, estimate when each of those responsibilities is likely to "sunset." For example, when will your mortgage be paid in full? How long do you expect your children to remain financially dependent on you or your spouse? Do you have college debt that is set to be paid off by a given date? Then, shop for a policy that will cover you for as long as you anticipate having financial responsibilities that you would not want to fall on your loved ones.

AIG Direct's Term Life Insurance calculator can help you work through this process and give you an estimate of what kind of coverage you might want.

How Do I Apply For Term Life Insurance?

If you've decided that Term Life Insurance is for you, the first step is to get a quote from AIG Direct. You can get a quote online at AIG Direct or by calling one of our agents at (800) 294-4544. Our agents will ask you for some information about yourself, your current circumstances, and financial responsibilities and can advise you on the options available to you. Once you have a quote, you can submit a formal application for a Term Life policy. Alternatively, you can complete the entire process, from quote to application and eventual purchase of your policy, using AIG Direct's DIY online life insurance platform.

Note that you may be required to undergo a medical exam as part of the application process. The underwriting process takes a few weeks from there, at which point you'll receive a decision on your coverage and rates.