Disadvantages to Term Life Insurance
[social_share]Term life insurance policies can provide much needed assistance to policy holders who are looking for adequate coverage for the near future but without having to pay a lot in monthly premiums. Term life insurance can help such customers build up a significant savings as well as provide them the freedom of not being locked into a long term contract. There are, however, some downsides to term life insurance policies which all policy holders should be aware of. Below is a list of the disadvantages to term life insurance.
Less return on investment.
Unlike whole life insurance policies, which gain in cash value as the policy holder maintains a single premium throughout the life of the policy, term life insurance policies do not accrue any cash value. Because of this, if the term life policy holder passes away after their insurance plan has expired, their dependants or beneficiaries receive no cash out (also known as the death benefit). Term life insurance policy holders essentially pour all of their premiums into an insurance plan and do not see one cent in return if they survive their policies, whether in a cash value for their personal savings or in a death benefit to loved ones.
Renewal difficulties.
If a term life policy holder lives past the expiration of their insurance policy, they are forced to renew it. When it comes to term life insurance policies, however, a renewal is not a true renewal, in the traditional sense. Instead, renewing a term life insurance policy means applying for a brand new policy with completely new premiums and coverage. Policy holders are often required to prove insurability all over again, despite having just completed their previous life insurance plan. If the policy holder’s insurance agency deems them to be uninsurable, the policy holder will need to shop around for a new insurance agency. Furthermore, because policy holders have aged since they took out the previous term life insurance policy, their premiums are almost guaranteed to rise on their new term life plan.
Less flexible conditions.
Once the terms and conditions of a term life insurance policy are agreed upon, they effectively become set in stone for the duration of the policy. If the customer suddenly realises that they want additional time on the term of their life insurance policy, they are most often stuck with what they already have in writing and can do nothing to change it. This also applies to the amount of coverage that has been put in place, as well as to payout amounts. For this reason, policy holders are advised to always think through the terms and conditions of their term life insurance policies before signing on the dotted line.
