Term insurance is one form of financial protection that is both loved and despised. Some financial advisors advise that it is best to invest the difference between high-premium cash-value plans and low-premium term plans in capital-appreciation funds. Other advisors and even some clients view term insurance as a waste of money. Term plans refer to those that remain in force for a specific period and do not offer cash values. Some companies offer a variety of coverage periods and even refundable term options. The latter is of dubious value. However, the view that non-refundable term insurance is superfluous is somewhat misguided.
Adequate insurance coverage for low-income earners is a significant merit of term insurance. The premium of cash-value plans may prove too great for those on the wrong end of the income ladder. The existence of these types of plans means that such persons do not have to go without insurance or remain underinsured. Those who may be rated because they belong to higher-risk groups can also benefit from the lower premiums. This option ensures that they can still afford financial protection when cash-value plans are prohibitively high. Even higher earners could enjoy more disposable income for savings and other needs.
Term plans are useful for covering short-term life insurance needs. Overall coverage may consist of long terms needs like estate preservation and also ephemeral needs like mortgage protection. Term insurance is ideal for coverage needs that have a span of twenty years or less. This allows people to get coverage tailored to specific needs that may arise from time to time.
Lower-premium plans can also help people cover other protection products and save for retirement. It is a fact that if you spend too much of your disposable income on one financial product, you may handicap your financial plan. If you spend too much on life insurance, there may be little left for other necessary financial products.
Another benefit of non-refundable term insurance plans is the absence of surrender charges. The fact that these can also lapse a lot easier than cash-value plans is a major demerit. However, term insurance not as much rubbish as some sales representatives would have you believe. For those who wouldn’t save otherwise, taking a cash-value plan may be a better option. Depending on your circumstances and needs, non-refundable term insurance can save you money and serve you better.