Top 5 Reasons To Buy Cheap Term Life Insurance
All right, all right, first of all, I hate using the word "cheap". I am a big proponent of the Warren Buffet idea that says "Price is what you pay, value is what you get". It applies to life insurance too. It might seem like one life insurance policy is the same as any other, but nothing could be further from the truth.
Photo by Ray SkinnerA few years ago we had a big price war in the term life insurance industry, with carriers were competing with each other mainly on price. That was a time when you really couldn't tell the difference between policies except for the name of the insurer on the cover page! Today, things are different.
Today, term life insurance policies are available with all sorts of features, and comparing one policy to another can be a bit tricky. I'll take a look at some of those features in another article, but for now, let's take a look at a few reasons why you just might want to focus on price and consider a cheap term insurance policy.
- You are on a very limited budget.
- Your need for insurance is truly temporary.
- You really don't need any extra features in your policy.
- You are adding coverage to an existing life insurance program.
- You aren't concerned about the insurance company's ratings.
Now let's take a look at each of these reasons in some detail.
Life Insurance on a Limited Budget
I won't go into trying to establish the need for life insurance here, but if you need it, you need it! IF you need it, and you are on a tight budget, you still need it! This might be a good opportunity to buy the cheapest (least expensive!) policy that you can qualify for. Finding a policy that doesn't have a lot of extra features (convertibility options, living benefit riders, etc.) can save you a pretty good amount of money over some of the more "full-featured" policies.
It might also be that you are on a tight budget because of a temporary financial hardship (e.g., loss of a job). I'm a financial planner as well as a life insurance agent, so I have a fair amount of experience with all aspects of people's financial lives. And I can tell you directly from that experience that when tough financial times hit, the life insurance policy is one of the first things to go. When people lose their job or suffer some other financial loss, it's often easy to think "Hey, I can't afford this expensive life insurance policy right now. I'll just buy another one after I get a new job". That is a mistake. You never know if you will be insurable in the future, so it makes sense to maintain coverage if you can. A cheap term insurance policy might be a good fit for this as well.
Temporary Need for Life Insurance
If you have a truly temporary need for life insurance coverage, it could make sense to go with the cheapest term policy you can qualify for. Industry studies tell us that people will keep their life insurance policy for an average of seven years before replacing it. Often, they will replace it because then need more insurance, or because they want to guarantee a longer "level term" period for their premiums. Sometimes they will replace it because they want a feature or benefit that is only available in a newer policy. Regardless, if you have a truly temporary need for coverage (e.g., court-ordered life insurance to cover child support payments), the cheapest term policy will probably suffice. You might still want a policy with more benefits, but it's possible that a cheap term policy would work well for this purpose.
Don't Need Extra Features
This is one is simple. If you are sure that all you want is a death benefit, and you are 100% certain that you aren't interested in things like conversion options, child riders, disability insurance riders, etc. then a cheap term life insurance policy can be great. Just be certain that you don't want those benefits, because the cheapest policies won't have them available and if you do want them in the future, you will probably have to re-qualify for a new policy.
Adding Coverage to an Existing Life Insurance Program
Now this is one reason that I am personally familiar with as a consumer. As a life insurance agent, I have plenty of coverage on myself and on my wife. And I have "the good stuff" (remember the Warren Buffet quote!). But we recently purchased a new house, complete with a new mortgage. We decided that we wanted to get some extra coverage that would last for the next 15 years, until we have the house paid off. We opted for two new cheap term life insurance policies, because our existing life insurance coverage has all of the "extras" that we want in our core life insurance program. So consider this if you are adding to your existing life insurance.
Not Concerned About Life Insurance Company Ratings
All right, first of all, you should be at least a little bit concerned! There are a number of rating agencies (A.M. Best, Moody', S&P, Finch) that assign a rating to each insurance company which is suppose to be an indication of that company's financial condition. You don't want your insurance company to go out of business, and you certainly don't want to die and have the insurance company not be able to pay the death benefit to your heirs! So you should be a little bit concerned. But...if you can tolerate the idea of buying insurance from a "B" rated company rather than one of the many A+ rated carriers that we represent, you might be able to save a few dollars on your premiums. I'm not suggesting that you do this, and in my opinion I don't think it is worth the very small savings you might get, but it is an option.
(Incidentally, we only work with "A-" or better rated carriers here at Rates4Term.com/Cona Financial Group. We just aren't comfortable placing our clients' trust with anything less. The cost savings just is not worth it.)
So the decision to buy a cheap term life insurance policy is really up to you, and if you are going to do it, just make sure you are doing it for the right reasons. Here's something to consider: As an independent agency, we work with over 75 of the top-rated carriers and when you factor in our expertise at finding the right policies for our clients needs, you just might find that you can get a full-featured term insurance policy at cheap term policy prices. Call us at (877) 883-3561 if we can help.