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by Christy Bieber
Image source: Getty Images
Don't make a misinformed choice about whether term life insurance is worth paying for.
Check out The best life insurances for 2021
Term life insurance is a popular type of life insurance policy. Unlike whole life insurance, a term life policy isn't meant to provide coverage indefinitely. Instead, the policyholder's beneficiaries are protected from financial loss for a limited period. If a term policy lasts for 30 years, then the policy would pay out the death benefit only if the covered person died during that time. If they didn't, the coverage would end and no death benefit would ever be paid out.
It can be painful to imagine paying premiums for a few decades, only to end up with nothing to show for it in the end. As a result, many people end up wondering if term life insurance is a waste of money in the event the covered person outlives their term and the life insurance ends with no payout.
In reality, however, this is an ideal outcome and one most people should hope for.
When a person buys term life insurance, they don't pay premiums to ensure a death benefit pays out. The money isn't being sent to the insurer in exchange for a future promise that a large lump sum will always go to family members.
Instead, the premiums buy protection in case the unexpected happens. The money is paid out to transfer the risk of untimely death to the insurance company, rather than to loved ones or family members. Insurers act
benefit, then the would-be policyholder might be denied coverage entirely or asked to pay higher premiums, which could make the cost of the policy prohibitive.
Find the Lowest Rate on Life Insurance
For many people who qualify for affordable coverage, the assumption is that no death benefit will ever payout. The coverage is in place in case the worst happens, but neither the insurer nor the policyholder should expect that the death benefit will be paid. This doesn't make the coverage a waste when the policy ends, any more than it's a waste of money to have car insurance but not get into an accident.
By contrast, with whole life insurance, the payout of the death benefit is assumed to be a given, since the policy is supposed to remain in effect indefinitely as long as it's not canceled and the premiums are paid. But whole life policies are much more expensive because insurers know they'll eventually need to provide beneficiaries with a large lump sum. Ironically, for most people, it's paying these high premiums indefinitely that ends up being a waste, since for most people there comes a time when no insurance coverage is needed.
For most people, term life insurance coverage is a good investment -- even if the policy never pays out, and is unlikely ever to do so. Anyone who has loved ones depending on them for goods or services should likely pay the affordable price necessary to protect their family from financial disaster in the event a surprising untimely death occurs. The price of peace of mind is well worth it.
While many varieties of insurance coverage are designed to help protect a person's family and assets, life insurance is a vital type of protection. The right life insurance can help protect the people that depend on you the most if you should pass away. Choosing the right life insurance policy is critical to ensure your loved ones are protected properly. We have sorted through the various options to provide you with our choices for the best life insurance policies available today.
