Consumers will often choose to get term life insurance because it appears cheaper initially when comparing the premium to that of a permanent life insurance policy. It is important to note that when comparing term life premiums to permanent insurance premiums, the life of the policy should be taken into consideration. When purchasing life insurance based solely on the price, consumers often overlook the renewal premiums on a term life policy, and fail to see that a term insurance policy is often more expensive to maintain for the course of one’s entire lifetime as compared to having a permanent or whole life policy in place.
In deciding on whether to purchase term life insurance or to explore another option, consumers would be wise to go through a needs analysis with their insurance representative. Because term insurance is less costly during the initial term, and due to the fact that the majority of term policies are rarely claimed on, wise consumers should undergo an analysis of their insurance needs to determine if they are short term or long term. When purchasing term life insurance one should have a sound strategy in place.
A term life insurance policy is a very useful financial tool in protecting against a finite financial liability like a loan or a mortgage term. Because the contract is organized by durations (terms of either ten, fifteen, or twenty years), one can protect themselves and their family financially with a term contract while they are on the hanger for some specific financial liability like a loan or mortgage from the bank. Or perhaps one would want to carry a larger amount of personal life insurance while their children are dependents to insure their quality of life should they pass away while their children are still young. The strategy here is to maintain a larger face amount of insurance while the children are dependents for twenty years, but allowing the contract to end after the initial term because their children would then be able to take care of themselves should something happen to them.
Because term insurance is cheaper initially but gradually becomes more expensive with each renewal, it is often purchased but rarely claimed on. Most consumers who purchase term insurance without a strategy pay the lower monthly premiums during the initial term, but do not maintain the policy until they reach their advanced years due to high renewal premiums. At this point many consumers can no longer afford to pay the premium for their term insurance policy, cancel it, do not renew it, look for new coverage or end up passing away without any insurance in force.