It is the oldest and the most basic form of Life Insurance, but is it the best? What are the cons of Term Life Insurance?

The main disadvantage of Term Life Insurance is that you have to die before you benefit from it. It is true that it fills a very important risk management function and serves to protect your family and dependents from economic disaster in the unlikely event of your untimely death. However, there are other ways to provide this same protection in a creative and ultimately more profitable manner.

One of the major cons of Term Life Insurance is the problem of renewability. When the term of the insurance is expired, it is not going to be easy to renew it without paying a much higher premium. The original premium and initial cost of Term Life may be low when the insurance is purchased by a young client, but this is because the risk of death is low also. The Insurance Company is basically wagering that you will not die and most likely they are going to win the wager. When you are older, as you will be when the term expires, the risk of death is a bit greater and the Insurance is going to be more costly.

Another disadvantage of Term Life Insurance is that it is not serving in anyway as an investment vehicle. Permanent life insurance has many varied ways to provide the basic risk management function and yet insure that your money is actually working for you at the same time. Return of Premium Term Life Insurance which is now being offered by many Insurance Companies is an example. In this form of Insurance the entire amount of the premium is returned at the completion of the Term.

Return of Premium Term Life may have higher premiums, but since they are all returned at the expiration of the Term, the bottom line is that the protection you are seeking ends up being completely free. This is possible because of the ability of the Insurance Company to invest your premiums during the life of the policy. They are going to make a great deal of money on that investment and can afford to return the base premium amount to you at the end.

So, it seems reasonable that if profit and increase can be realized by the investment of premiums during the life of the Insurance Policy, why not share in that profit? Term Life Insurance has its place. It can be useful as a temporary supplement to provide additional protection for a specific problem such as a loan or to insure educational purposes. Yet, the permanent and inventive forms of Life Insurance that serve as both investment vehicles and risk management tools offer a much better solution to the overall Life Insurance question.