What are the Pros and Cons of Purchasing Term Life Insurance?
Financial security is something that every individual is hoping to achieve. But while the goal itself may be clear, the best path to get there can be a little less obvious. If you and your family are hoping to become financially secure, you are inevitably going to have to make some tough decisions.
When trying to create a well-rounded financial portfolio, there are two primary things you are going to want to keep in mind. You are going to want be thinking about capital growth, and you are also going to want to be thinking about capital protection.
How can you make sure your money is being utilized in the most efficient way possible? How can you be sure your family’s best interests will always be protected? Though the path to financial security may not be the same for everybody, it is important to plan for your financial future with a dynamic and adaptable perspective.
For millions of families across the country, purchasing term life insurance has been among the safest ways to get the peace of mind they need. But as is the case with all possible investments, you are going to want to think about the pros and cons associated with life insurance before making a final decision.
What is Term Life Insurance?
Term life insurance is a type of financial asset in which you pay a monthly premium in exchange for financial protection. As the name might imply, with term life insurance, you will be insured for a specific term. Usually, these terms are 10 or 20 years long.
Throughout the term of your life insurance policy, you will be paying a predetermined amount each month. In the event of your death, your chosen beneficiaries will be paid a predetermined amount of money.
Usually, individuals purchase a term life insurance policy for the same reason they would purchase any other kind of insurance. In an effort to minimize the consequences of an undesirable scenario (in this case, your death), policyholders are willing to make a little sacrifice each month.
The amount you will be paying each month for life insurance is determined by several different factors. The length of the term, the size of the policy, and any additional add-ons (riders) can cause your premiums to go up or down. Additionally, your age, health, and lifestyle will also be considered.
Many individuals can find good life insurance policies for less than $10 per month. When compared to many other kinds of insurance, this seems like a great deal. Though the tangible benefits of a term life insurance policy will not materialize in your lifetime, for individuals trying to provide their family with security, this small cost can be worthwhile.
The Case for Purchasing Term Life Insurance
Whether or not term life insurance is the right investment for you is going to depend on your personal situation and financial goals. Some individuals might prefer to invest their money elsewhere. But for others, purchasing term life insurance is what helps them be able to sleep at night.
If you have a spouse, children, or any other sort of financial dependent, you are going to want to make sure they will be protected no matter what. Naturally, you would not want them to have to suffer financially in the event of your death. By purchasing term life insurance, you can guarantee they will be provided for.
If you purchase term life insurance while you are young and healthy, you can end up paying incredibly low monthly premiums. The potential financial rewards—financial security and asset diversification—remain tremendously high. The financial risks associated with them remain tremendously low.
Even if you are older, term life insurance is still something that can be incredibly affordable. As long as you are able to practice some fiscal discipline, you will be glad to know that your loved ones can be financially secure as a result.
The Case Against Purchasing Term Life Insurance
Though purchasing life insurance seems to be a low-risk, high-reward investment, it is still important to be thinking about the opportunity costs associated with it. Every dollar you spend paying life insurance premiums is a dollar that could be spent somewhere else.
The most common argument for why someone might not want to purchase term life insurance is that it is simply not necessary. If they are someone who does not have any financial dependents (and are not planning on having any in the future), then the cost of paying premiums might appear to be greater than the associated benefits.
Another common argument against purchasing term life insurance is that the money could perhaps be spent more wisely elsewhere. Some individuals who are willing to pay higher monthly premiums might prefer to purchase whole life insurance. Whole life insurance is not restricted to a given term and also has an associated cash value.
Other individuals may want to bypass the cost of life insurance altogether and invest in something with a greater return on investment. A life insurance policy cannot possibly match the returns provided by investing in the stock market. They can, however, establish a sense of financial security that the stock market simply cannot.
Things to Consider When Deciding Whether or Not to Buy
When trying to decide whether or not to purchase a term life insurance policy, there are a lot of different factors you are going to have to keep in mind.
- Can you find a way to fit the premiums into your monthly budget?
- How many financial dependents do you currently have? What is the degree of their financial dependency?
- What are your long-term financial goals?
- How important is it that your family is protected in the event of your death?
Financial planning is no easy task. It can become even more difficult when you have to think about the effect your death might have on others. But by asking these questions and considering the associated pros and cons, your family can begin moving in the right direction.
If you have any questions regarding term life insurance or life insurance in general, please leave a comment below. You can also give us a call at 1-800-521-7873 or visit our life insurance quotes page to learn more.