Navigating the ins and outs of all the different types of life insurance can seem intimidating, especially if you’re looking for your first policy. Term life insurance can be a good fit, particularly for young families on a budget looking for coverage for a set amount of time. Term life insurance offers four important advantages.
1. Less expensive
Term life insurance rates are more affordable than whole life insurance because it offers protection for a predetermined time. The life insurance company is hoping it will never pay out because you will outlive the term and the policy will expire. Whole life insurance premiums, by comparison, are higher because the policies pay out no matter when you die. All of the best life insurance companies sell term life.
2. More flexible
You have many options when it comes to term life insurance. Coverage can last as little as one year, as with annual renewable term life. Or you can lock in rates for as few as five years if you need to cover a short-term debt like tuition expenses while your child is in college. Policies also come in 10-, 15-, 20- and 30-year terms. If, for example, you want a policy that would cover your mortgage and your children’s college tuition, a 30-year policy might be a good match. As these needs disappear over time, so might your need for a policy.
3. Good for young families
Because term life doesn’t build cash value and only covers a specific period, it’s generally less expensive than whole life insurance and a better value for young families. Many young families are financially stressed, shouldering the costs of caring for small children, a mortgage, perhaps an auto loan, saving for college and retirement and other expenses. Term life insurance can provide peace of mind without gutting your wallet.
» COMPARE: NerdWallet’s life insurance comparison tool
Term life insurance is easy to understand, which makes it simple to shop around and compare rates. You need to make only three main decisions: coverage amount, length of term and preferred company. As long as you pay the premium, you’re covered for the duration of the policy.
For many people, term life insurance is a simple, affordable way to safeguard the financial health of loved ones if something happens to you. NerdWallet’s life insurance tool can help you easily compare rates.
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