- Term life insurance is cheaper than other options, like a whole life policy.
- Although term plans have no cash value, they will save you money on insurance costs that you can invest elsewhere.
- By the time my term life insurance policy expires, I hope to be financially stable enough that I don't need life insurance.
- Policygenius can help you secure the right life insurance coverage for your needs »
When my oldest daughter was born five years ago, I knew it was time to buy life insurance. And yet, it was another four years until I actually purchased a policy. That's because I didn't know where to start.
The most basic choice — whether to select term life insurance or a whole life plan — sent me into a spiral thinking about everything I didn't understand about insurance.
Looking back, I wish I could tell myself that it's not that complicated. While whole life plans cover you until you die, term life insurance plans provide you with life insurance for a set number of years.
However, term life insurance has many benefits, and is a good fit for most people. Here are the four reasons I'd tell anyone to get term life insurance.
It's cheap
Most people shopping for insurance — especially young people — are concerned about premiums, or how much they'll be paying for insurance. One of the biggest benefits of term life insurance is that it's much cheaper than whole life insurance.
With two young kids and a business, I'm always looking to minimize expenses. I found a $250,000, 20-year term life insurance policy that costs me $29 a month. It's cheap enough that I don't think twice about paying the premium, or even notice when it's withdrawn from my checking account.
It does its job
Term life insurance has one job: to replace your income if you die. In my case, I chose a plan that would replace my income long enough to cover my funeral, pay off the mortgage, and allow my husband to stay home for a year with the kids. That's all I want or expect from my plan. It's simple.
Whole life insurance policies, on the other hand, get complicated. They combine life insurance with investments (which is why whole life plans have some cash value and even pay dividends sometimes).
The thing is, I'm not looking for life insurance that's an investment. I have a retirement account and a rental property for that. I would rather pay for a cheaper term insurance policy and use the money I'm saving to invest separately (which is a good option for most people, according to this analysis).
In the future, I hope to not need insurance
One of the perceived drawbacks to using term life insurance is that, eventually, your term expires. By then you're older and possibly sicker, so buying another term plan can be very expensive.
That's a good thing to be aware of. And yet, I'm hoping that by the time my term expires (in 19 years) I won't need life insurance.
If you're financially stable with little debt and a robust savings account, you don't need a big payment when you die. Instead, you can rely on your assets to cover funeral expenses and provide some financial support to loved ones, if necessary.
I can't predict the future, but I'm actively working toward being "self-insured" in this way by the time my term life insurance policy expires.
It's money well spent
The ironic thing about life insurance is that the best-case scenario means you're throwing money away. I really hope that I'm alive and well in 19 years, and that I've "wasted" the $6,960 I'll have paid in life insurance premiums by then.
But the truth is, that money won't have been wasted at all. Right now, having life insurance and knowing that my family is protected if I die gives me tons of peace of mind. I sleep better knowing if the worst happens my husband won't be scrambling. Sure, I hope I never need the life insurance policy, but I'm happy to pay for it knowing that it could make an unbearable loss slightly easier on my family in the worst-case scenario.
I spent four years knowing I should buy life insurance, but paralyzed by the options. Now that I've had insurance for a year, I see the ways it's eased my stress levels, for a small cost. That's why now I'm the person telling friends and family: "Don't wait."
Let Policygenius help you find the right life insurance for your needs »
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Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
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