Is term life insurance worth it? Here's what experts say (2024)

FAQs

Is term life insurance worth it? Here's what experts say? ›

Term life insurance may be a good option if losing an income would leave your family financially vulnerable. In this case, term life insurance acts as a safety net. For example, say you're in your 30s, married and have young children. Maybe you have a mortgage as well.

Suze Orman recommends that generally most people should get a 20 year term life insurance policy at 20 times your annual income. What does that mean? That means if you're 30 years old and you make $50,000 a year you should get a million dollar 20 year term life insurance policy.

Term Life insurance Cons: If you outlive the term length, your coverage will end and you won't receive any benefits. You will not be covered your entire lifetime and your policy will not accumulate cash value like an investment account does.

Drawbacks of term life insurance

If you outlive the term of your term life insurance, the policy expires and has no value. If you're looking for a way to leave money behind, a term life insurance policy most likely isn't a good fit. No cash value. Term life insurance doesn't build cash value.

When is term life insurance worth it? Term life insurance is smart when you have debts or a time-boxed expense — something you want to ensure your dependents can afford should you pass away. This might include a mortgage or credit card balance, for example, or something like school tuition or car payments.

Life insurance is no longer needed for many people once they reach their 60s or 70s. At this point they retire, their kids have grown up, and they've paid off their mortgage and other debts. However, others prefer to keep life insurance later in life to leave an inheritance and to pay off final expenses.

Therefore, if you're buying term life insurance primarily to replace your income, you may not need it after retirement. Once your kids are grown up, the house is paid off and you're living off your retirement savings, life insurance is one more thing you no longer need to worry about.

As opposed to term plans, a part of whole life insurance premiums is invested in financial instruments. A cash value is therefore built up over time. This can be used by the policyholder to borrow money at a cheap rate. Term plans, however, do not offer such a benefit.

Term life is more affordable but lasts only for a set period of time. On the other hand, whole life insurance tends to have higher premiums but never expires. Knowing the differences between term and whole life insurance will help you choose a policy that works best for you and your lifestyle.

Term life insurance provides coverage for a certain length of time, with policies commonly lasting between 10 and 30 years. Unlike a permanent life insurance policy, which offers lifetime protection under most circ*mstances, term life insurance coverage typically ends once you've outlived the term.

Do you lose money with term life insurance? ›

Term life is typically less expensive than a permanent whole life policy – but unlike permanent life insurance, term policies have no cash value, no payout after the term expires, and no value other than a death benefit.

Millennials may perceive life insurance as expensive, especially when burdened with student loan debt, housing costs, and other financial obligations. For example, federal student loan debt totals over $1.6 trillion, and millennials hold over one-third of this debt.

A whole life policy is generally considered the most secure form of insurance. Whole life policies have more rigid premium payment requirements than universal life policies. As long as scheduled premium payments are paid, the cash value is guaranteed to increase each year.

The bottom line. Life insurance is a smart idea for most seniors. That's especially the case if you have a spouse, lack plans to cover end-of-life costs or don't have a long-term care insurance policy. The simple fact is that just about everyone has someone who loves them, depends on them or both.

A return of premium (ROP) life insurance rider is an optional add-on to a term life policy that, if you outlive the policy term, pays you all or some of the money you spent on policy payments.

Life insurance is a good idea at any age if people in your life depend on your income. That could mean a partner, kids, aging parents or employees of a business you own. If you die prematurely or unexpectedly, your financial dependents might struggle — having a life insurance policy in place can ease that burden.

Suze Orman isn't a fan of whole life insurance, and especially not as an investment. Investment portfolios for whole life policies usually have expensive fees and are overly conservative. Keep your investments and insurance separate, and stick to term life insurance instead of whole life.

If you have dependents, now is the best time to get it. If you have young kids, you need it for at least 15–20 years. Even if your spouse works, they count on your income too. Get a term life insurance policy worth 10–12 times your income.

Term life insurance can typically provide higher coverage amounts than no-medical exam option life insurance for older people. If you die during the policy term, term life insurance can provide a significant death benefit for your beneficiaries that will help them achieve their goals and fulfill their dreams.