Term life insurance is basically one kind of coverage, which gives your family financial protection should you die within the policy's duration. Most people buy term life insurance policies as a "contingent" policy. That means that if you die within the term of the policy, your loved ones are not left devastated financially. If however you die later in life, your dependents will get nothing. If you have a non-contingent term life insurance policy, then, depending on the state you live in, your family will receive either the death benefit or the cash surrender value, depending on the stated terms at the time of signing up.
1. The disadvantage of this kind of coverage is that it has a very high premium, and it has no death benefits or cash surrender values. Your premiums increase every year, so if you do not have a large death benefit, you may decide to cancel the policy and move onto another insurance plan with better premiums. This disadvantage can work against you, though, if you need the coverage and cannot afford the higher premiums.
2. Another disadvantage is that you may need coverage for a longer period of time than you had planned, and some policies specify that you can only have the policy for a certain amount of years. This could cause financial strain for your loved ones if you should pass away before having paid your premiums for the specified number of years. There may also be a grace period following a loss of income and set period after which you can decide to discontinue your term life insurance. This grace period could leave you unable to pay your premiums for a period of time, leaving you in a position where you are not able to maintain the policy. You can also be penalized for opting out of your term life insurance policy. This means that you will be required to pay more money out of your pocket should you decide to opt out of the policy.
3. Many people who purchase term life insurance choose to have coverage for an "immutable" cash value. This simply means that when you reach a certain age, your benefits become non-taxable, meaning that they cannot be taken out again. This could leave many young couples wondering what advantages it gives them over other options. Here are a few disadvantages and some potential explanations as to why this type of insurance might not be right for you:
Cash value policies are usually only beneficial to you and your beneficiary if you die within the specified term. These policies are usually purchased by younger couples and do not usually provide any benefits for your estate or beneficiaries. In addition, these policies often have very high premiums. Many young people may find that the cash value is not worth the cost to maintain.
You can purchase universal or convertible term life insurance policies. These two types allow you to change your coverage from time to time. Universal policies remain the same in terms of premium payments and benefit accruals, while convertibles do so by paying a premium to a designated beneficiary, who in turn has the option to elect to keep the policy and pay the premium. Unlike in traditional insurance policies, there is no medical exam required for these policies. However, you should always get a medical exam before taking out a term life insurance policy.
1. The disadvantage of this kind of coverage is that it has a very high premium, and it has no death benefits or cash surrender values. Your premiums increase every year, so if you do not have a large death benefit, you may decide to cancel the policy and move onto another insurance plan with better premiums. This disadvantage can work against you, though, if you need the coverage and cannot afford the higher premiums.
2. Another disadvantage is that you may need coverage for a longer period of time than you had planned, and some policies specify that you can only have the policy for a certain amount of years. This could cause financial strain for your loved ones if you should pass away before having paid your premiums for the specified number of years. There may also be a grace period following a loss of income and set period after which you can decide to discontinue your term life insurance. This grace period could leave you unable to pay your premiums for a period of time, leaving you in a position where you are not able to maintain the policy. You can also be penalized for opting out of your term life insurance policy. This means that you will be required to pay more money out of your pocket should you decide to opt out of the policy.
3. Many people who purchase term life insurance choose to have coverage for an "immutable" cash value. This simply means that when you reach a certain age, your benefits become non-taxable, meaning that they cannot be taken out again. This could leave many young couples wondering what advantages it gives them over other options. Here are a few disadvantages and some potential explanations as to why this type of insurance might not be right for you:
Cash value policies are usually only beneficial to you and your beneficiary if you die within the specified term. These policies are usually purchased by younger couples and do not usually provide any benefits for your estate or beneficiaries. In addition, these policies often have very high premiums. Many young people may find that the cash value is not worth the cost to maintain.
You can purchase universal or convertible term life insurance policies. These two types allow you to change your coverage from time to time. Universal policies remain the same in terms of premium payments and benefit accruals, while convertibles do so by paying a premium to a designated beneficiary, who in turn has the option to elect to keep the policy and pay the premium. Unlike in traditional insurance policies, there is no medical exam required for these policies. However, you should always get a medical exam before taking out a term life insurance policy.
