Term Life Insurance is the other broad category of life insurance. Frequently referred to as “pure insurance protection,” term insurance doesn’t include the cash value feature that distinguishes whole life. Accordingly, term is usually significantly less expensive than the same amount of whole life coverage. This form of insurance covers you for a specified period of time (often 10, 20 or 30 years), and then it expires. If you are still alive, you get no money.  

In recent years there have been a number of changes (better term life products, a generally more astute public, and a greater assortment of investing options) that have diminished the appeal of traditional whole life insurance for many people. In my judgment, term insurance is the way to go for many people. To me, the purpose of life insurance to be just that—to insure a person’s life, nothing more and nothing less. I prefer to do my investing separately. I see life insurance as most appropriate until an individual either builds adequate assets to effectively self-insure, or until he has no more need for the coverage. The old adage, “buy term and invest the rest,” may prove good advice. Granted, it requires greater discipline to send a second check to a mutual fund or other investment. But, many people feel that the rewards outweigh the extra effort.

I like to tell people that there are at least three important things to look for in a term life insurance policy:

1) I’m big on stability, so I prefer policies that have a guaranteed level premium for the term of the policy. Annual renewable term policies can raise the premium every year, until the policy is surrendered. If you are only going to keep the policy for a short while, annual renewable term may be cheaper, but experts warn that in the long run it will probably be more costly.

2) Also, I prefer term insurance that guarantees level term benefits. This means that if you buy a 20 year, $100,000 policy, your beneficiary will get the full $100,000 whether you die in year 2, 10, 18, or whenever.  Decreasing term is another type of policy that will pay a lower benefit the closer it is to the end of the term. Sometimes sold by banks as mortgage protection, decreasing term benefit coverage is a big profit maker for the banks, but many experts don’t believe it’s very good for consumers.    

 3) Guaranteed renewable can help safeguard an uncertain future. Of course the goal is to get to the point where you don’t need insurance coverage at some point. And, besides, if you still do need coverage at the end of your term—you can just buy some more insurance at that time, right? Not necessarily.  It’s possible that you may still need insurance at the end of your term, and it’s also possible that health conditions could make it impossible to get decent coverage. What to do? You might wish to consider buying the original policy with the guaranteed renewal option.  This may make it possible to get more coverage at a later date. However, be aware that future rates can be prohibitively expensive especially if you health declines. Get detailed future rate information before you buy.