Pros and Cons of Term Policies

The primary advantage of term life insurance is that it requires a low cash outlay. This is because the term policyholder is paying only for the pure insurance protection, rather than term plus an additional amount to go into a side fund (cash value) that will be invested within the policy.

Term policies are usually by favored people who fall within one or more of the following categories:

The biggest disadvantage with a term policy is that the premiums rise at the end of each term, and can reach the point of being very hard to afford. Another disadvantage is that term policies lack some of the income tax advantages available for some types of cash value policies.

If you do decide to purchase a term policy, make sure that it is a guaranteed renewable policy. This means that at the end of the policy term you can renew without taking another medical exam, and without regard to how bad your health may be at the time of renewal.

You may want to take a quick look at our tabular comparison of the various types of term and cash value insurance policies.