Life Insurance Blog

Term life insurance can serve as a great financial tool for anyone who needs life insurance coverage but cannot afford to pay the higher premiums that are typical with whole life insurance policies. For some people, however, arranging term life insurance is less about the cost and more about the restrictions involved. Such individuals do not want to be locked in to the same policy for 30 years without the freedom to amend and adjust their terms and coverage, another drawback to whole life insurance. Term life, which is perhaps the most flexible form of life insurance on the market, meets that need quite easily.

There are dangers, however, which crop up whenever someone bends over backwards to find particularly cheap term life insurance. While not all inexpensive term life policies are to be regarded with equal suspicion, there are downsides for which people must keep an eye out. Listed below are some of the pitfalls of cheap term life insurance.

Cheap term life insurance may carry an inadequate death benefit

In the event of a policyholder’s death, benefits on any life insurance plan provide a helping hand to the dependants and other loved ones who have come to rely on the insured individual. Were it not for the prospect of a death benefit, in fact, life insurance policies would most likely cease to exist. For this reason, it is vitally important for anyone seeking to take out a life insurance policy to ensure that their death benefit is of an amount that will adequately provide for their family and loved ones. Term life insurance, because it is already cost-effective, may short-change policyholders on death benefits if it is purchased at very cheap rates. A sacrifice is always made to get a lower price, and bargain-basement prices may indicate the lack of a robust death benefit.

Cheap term life insurance may encourage an inadequate term of coverage

The maximum amount of time that a policyholder will be covered under a term life insurance policy is 15 years. This differentiates term life from whole life as well, as most other life insurance products because term life is more easily customisable to the needs and wishes of the insured. If they do not want 30 years of coverage, they can opt for 15, 10 or even less. The problem here is that cheap term life insurance will most often promote the smallest coverage terms available. This is another way that term life insurance providers may sacrifice in the name of cutting costs. For most people, however, abbreviated terms are not ideal, nor are they practical, as they want to provide for their families beyond simply the next handful of years. In this way, cheap term life insurance can pressure the policyholder into accepting a truncated span of coverage that will limit their protection as well as end up costing them more in the end.

Cheap term life insurance may encourage a lapse in protection

It is too easy for a policyholder to allow their life insurance coverage to lapse when they are saving money on their cheap term life plans. This is because the policyholder knows that they can obtain another policy for cheap after their current plan has expired, an idea that may lead some individuals to grow lazy when renewing their plans. Should disaster strike before they have a chance to renew, their families will pay the ultimate price when they are without the added protection that a life insurance policy could have provided. Furthermore, it is a fallacy to believe that successive term life policies will be just as cheap as their predecessors; as the policyholder ages, each renewed life insurance plan will increase in cost to account for the individual’s increased risk.