Is Term Life Insurance a Good Bet for You?


I was sitting at the kitchen table of a couple who had called me for help. When he called, he introduced himself by telling me who referred him to me, and, then, just as quickly blurted out: “We need your help.” He said he didn’t understand why their life insurance premiums kept going up each year and then confessed, “My wife told me to call you. We’re on a fixed income, and she is worried that if our life insurance premiums keep going up, we won’t be able to afford life insurance.”

As he set their policies before me to review, she reminded me of her concern. She also informed me she was taught the value of life insurance by her father who instilled in her the values of planning, responsibility, and taking care of family. “I don’t want to leave funeral costs and debt to others to have to pay.” “And I know,” she continued, “that if I were to die first,” (her husband gave her a look that says, “Don’t even speak of that!”) “Dale [her husband] would need money to fill the void I would leave. I’m sure he doesn’t realize my worth . . . “ He interrupted, “Of course, I do. Honey, you’re worth more than I can say.” “That’s not what I mean; I’m talking about financial value. You would need to fill in the gap of my lost income; and, in addition, you are too busy to take care of the house and do domestic chores, so you would need to hire out those things.”

“I hadn’t thought of that,” he quietly replied. “Gosh, you’re move valuable than I thought,” he proclaimed with a sly grin on his face.

“Just as I thought,” I half-stated to myself while reviewing their policies, “you each have a term policy in which you’ve outlived the term.”

“What does that mean?” she asked. Then, as a growing fear come over her countenance, she raised her voice, “Does that mean we have no life insurance?!”

“No,” I quickly replied, seeking to calm her fear, “you are still covered by life insurance. However, because you have outlived the term of your policies, the premiums will continue to escalate each year.” Then I showed them the schedules of their future premiums, located near the back of the policies.

“Unbelievable!” he almost shouted. “If I stay with my policy, it will eventually cost me THOUSANDS of dollars per MONTH just to keep me covered!”

“True,” I said, “which is why we need to do something about this now—before you get any older and before either of you acquire any health issues. Let me, first, ask you a few questions; then, based on your answers to my questions, I will get some quotes—based on your needs; and, then, we’ll get back together to discuss a plan of action.” “That sounds good,” they replied in unison, with visible relief spreading over their faces.

The above scenario is a true scene, which I have seen played out—in one form or another—many times. Fortunately, we have been able to deliver a lot of people out of that experience of helplessness and hopelessness; but it is always better to be prepared from the beginning, rather than to frantically look for deliverance from a hole you have stumbled into.

Am I saying, by this dramatization, that term insurance is bad—that is the evil we need to avoid? Not at all. Term insurance definitely has its place in life planning—and what will eventually occur at the end of that life—but it is not for everyone.

The Value of Term Life Insurance

Term life insurance is the lowest cost life insurance available today, meaning term insurance is the least expensive way to purchase a substantial death benefit per premium dollar over a specific period of time. The reason term life insurance is the lowest cost life insurance is because far fewer term policies pay out (the death benefit) than any other type of life insurance. Here is the way it works.

An individual takes out a term life insurance policy. The term could be as little as 5 years, or it could be a 10-year term, a 15-year term, a 20-year term, or, depending on one’s age, a 25-year or 30-year term could be available. (Definitely, if you’re 65 or older, the 25 or 30-year term will not be available). The premium is locked in—does not increase—for the duration of the term. When the individual outlives the term (as most people do), the premium goes up; and it typically continues to increase each year after that—until, either the death benefit pays out or the individual drops the coverage due to high premiums.

Term Life Insurance Isn’t for Everyone

Years ago, a charismatic, high school coach began a multi-level company selling life insurance and writing mutual funds. He was passionately convinced that term life insurance was for everyone—that is the only life insurance product anyone should buy; and he drove home that philosophy by crafting this continuously-repeated theme: “Buy term and invest the difference.”

He was highly successful, selling a lot of term insurance and writing a lot of mutual funds on his own; but he also recruited hundreds, who then recruited thousands, etc. to sell under him. The philosophy made sense to everyone who bought into it, but the real tale would be told many years later—when those who bought into the philosophy outlived the term of their life insurance plans. When that occurred, most had intended to invest the difference but had not done so. They were then left with little or no money laid aside for retirement and life insurance they could no longer afford, though they had paid premiums on that insurance for 20 or 30 years. Thus, many years later, following the death of that well-known coach, the rest of the story was told, and it was not a happy ending for many.

Term life insurance isn’t for everyone; for, as (mentioned above) the coverage will not be available at the time of need for many, since it will be dropped when the premiums become unmanageable for the one paying the cost of insurance. So, who should look at purchasing term life insurance?

Where Term Life Insurance Makes Sense

The first group of people who are good possibilities to purchase term life insurance are those seeking to insure for the life of their mortgage. If, for example, the primary wage earner in the family has 15 years left on his or her mortgage, he / she could take out a 15-year term life insurance policy so that, if he / she dies during that period, the mortgage will be paid off. That ensures that the spouse and / or family will have a home to stay in—one where nothing (other than taxes and insurance, of course) is owed on it. That scenario makes sense for term life insurance.

Another situation where it makes sense to purchase term is where the primary wage earner in the family has young children but doesn’t have a large financial means. In that case, that individual may, for example, take out a 20-year (or so) term policy so that, if he or she were to pass away during that period, the death benefit would provide the means for the children to get through school and to get a good start in life on their own.

READ ALSO: 5 Tips for Buying Better Life Insurance (Part 1)

There could be a few other situations in which someone might be wise to purchase term life insurance. For example, if your children are in their 20s or 30s, and you would like to leave them extra money to help them and their families, term life insurance may be a good buy for you. Term might make sense in this case because you may be of the age where a large face amount (death benefit) with a permanent plan may not be affordable for you. Just keep in mind the risk of term life insurance—that you could outlive the term and face the possibility of dropping your life insurance. (However, in this scenario, a convertibility option on your policy could be a very good thing to possess. See information on this article below.)

However, before a determination should be done on that, the individual should meet with a reputable, licensed, independent agent who will do an involved needs assessment (take them through a series of questions, leading to a good understanding of their circumstances, needs, and goals).

Even then, expect your agent to shop several different insurance companies for the best options with the realization that term life companies are not all created equal. For you want to make sure you not only get the best rates on your premium, you also want to be with an insurance company that has a high rating (such as an A.M. Best rating of A- or better); and you want a plan that permits good convertibility.

Convertibility: A 50-Cent Word for Flexibility

Aside from relatively inexpensive rates, the best term life plans will allow convertibility. What is convertibility? I’m glad you asked.

Convertibility means that, up to a point, the insured has the option of converting the term policy to a permanent policy—without having to prove insurability. Thus, suppose a man takes out a term life insurance policy, but a few years later, develops a significant heart condition. At this point—outside of a guaranteed issue policy (which has a high cost for the amount of life insurance one can get and offers a relatively low death benefit)—the individual is uninsurable. So, it may make sense to convert his term life insurance to a permanent product, which will ensure the insurance will be there when it is needed. (Keep in mind that the premium will be higher when converting, as it will be based on the premium of the permanent plan you pick [adjusted based on the rating the insurance company gave you via underwriting the term life plan].)

But realize that some companies offer longer periods of convertibility than do others. The best convertibility options typically give you until age 75 to convert; others give you to age 69; some even lower. If the monthly premiums of two plans are only a few dollars different, you might consider the plan with the longer convertibility period; it will give you more flexibility in your coverage, and it may make the difference one day between being covered and not having anything to pass on to your family.

Accelerated Death Benefit: Getting the Money When It’s Needed

Some insurance companies allow an accelerated death benefit on their term life insurance plans. With this option, when a licensed, medical doctor determines one has a terminal illness (with 24 months, or less, to live), the insured can elect to take up to 75% (less for some companies that offer this benefit) of the death benefit in order to use as he chooses (e.g., to help with medical bills, travel, mortgage payments, bills, etc.). This option provides you with more flexibility; for, when facing a terminal illness, it may be more beneficial to access the money immediately than to wait another year or two for the death benefit to pay out. (However, while the death benefit paid in a lump sum is not taxable, in some cases, there may be a tax implication on policy money that is paid to the insured via the accelerated death benefit. See a tax professional about this.)

Is Term Life Insurance a Good Buy for You?

As mentioned above, term life insurance is not a good buy for everyone, but it could be for you. If you are still paying on a mortgage, you may want to look at term to cover the length of time left on your mortgage. Or if you have younger children and your death would leave them (and your spouse) struggling financially, term life insurance—with a term long enough to provide for your children to get out on their own and get a good start in life—would seem to be a good buy for you. Perhaps your children are in their 20s or 30s, and you would like to leave them extra money to help them and their families, term life insurance may be a good buy for you (as long as you keep in mind the risk of term). Term life insurance could be a good buy for you in another scenario, which could be determined by a reputable, licensed, independent agency after doing a needs assessment with you. It all depends on your situation (present and projected), needs, and goals. Your first step toward discovery is to get wise counsel. Find an agent you can trust, and begin the discovery process.

Linda WilliamsLinda Williams
10:08 12 Jul 23
I had a 5 star experience and would recommend him. Always returning my calls promptly, very helpful and informative, listened to what my needs was regarding my Medicare. I truly felt comfortable with John's help to navigate through the maze of Medicare
Cindy KulakCindy Kulak
14:51 18 Jun 23
John is very knowledgable, honest and ethical in helping clients evaluate Medicare options and get enrolled. He made the process extremely easy for myself and my husband.
Leeann MoosLeeann Moos
17:26 06 Apr 23
When I became eligible for Medicare, my phone was constantly under attack from Medicare options sales folk. Since I needed help understanding my options and life is too short to do business with annoying people a little research was in order. Thats how I found John. His other customers seem very pleased with his service and I decided to give him a try. I was NOT disappointed! He did an excellent job for me, is extremely personable and I could not be happier. Thank you John
Rose WrightRose Wright
16:07 05 Apr 23
I am so thankful for the help that Mr. John was able to assist me with medicare information. After being bombarded with letters and phone calls you just need someone who can walk you through the confusion. And after getting all the info and the best plan and benefits for what i needed. I am glad that He was there for me.Thank you so very much,Rose Wright
Steve HenselSteve Hensel
21:08 04 Apr 23
Claeys Group is great to work with. John is truly professional, knowledgeable and makes the entire process flow so much more smoothly than I expected. I would highly recommend him.
Deborah RounsavallDeborah Rounsavall
14:25 07 Mar 23
I changed from my person finance planning group to John for help. Others led me astray. John is very responsive and follows up promptly. Even helped me on the weekend at the end of year to get all my documents in on time so I didn't lose insurance coverage. Explains all the options in a manner that us rookies can understand it. I highly recommend John.
Setella ParksSetella Parks
13:12 07 Mar 23
John's knowledge is invaluable when it comes to navigating the murky water of Medicare plans. He answered all our questions in a manner we could understand and helped us compare benefits between plans, services, and providers readily available in our area. I am so happy we called on him to assist us! He handled EVERYTHING professionally and patiently and has followed up to make sure we are good. Highly recommend his 5 star service!
Sherry JonesSherry Jones
21:01 23 Feb 23
John was recommended by my sister-in-law, who spoke very highly of him. He wrote out the differences between policies and explained it step by step to me so I could understand which policy would be best for my needs. He was professional but also down to earth so I could be at ease. He did this at my bed side which was such a blessing for me. I highly recommend John for your Insurance needs.
19:40 20 Feb 23
We were recommended by friends to call John Claeys for our insurance. He came twice to gather information on what we were looking for and returned with information and details. We are delighted to have John Claeys as our agent and would recommend to our friends and anyone else to call John Claeys today.Tom and Debbie
Joyce SandvikJoyce Sandvik
20:32 30 Aug 22
John Claeys came to our house to talk about all aspects of Medicare. He wrote out some information on a notepad as he talked and answered our questions. He gave us the handwritten notes along with printouts of more information specific to my needs. My husband and I took o a few days to discuss the options. John took a list of my medications and researched all the available prescription insurance policies for me. He narrowed it down to the best policy (best prescription prices) for me. It was so easy and I felt confident I was getting exactly what I need when I turn 65. Every September, he will research prescription policies from my updated list of medications to find the best policy for my needs. Thanks to John Claeys for making this transition extremely easy and effortless.
Marilyn ScottMarilyn Scott
09:35 23 Jul 22
John enrolled my husband into Medicare 4 years ago. I knew then I wanted him to help me with my Medicare when it was my time to enroll. John helped me recently. He is very knowledgeable, humble and so patient. He made sure I had the best plan for me. He genuinely cares about his clients. He is the best insurance consultant! I highly recommend John for your Medicare needs!!
James MartinJames Martin
20:31 20 Jun 22
John did a great job of providing many options for my insurance. He is very thorough.
Judy MarkmanJudy Markman
17:02 20 Jun 22
John goes above and beyond to find the best insurance to fit your needs at an affordable price. I definitely recommend!
Dave LemingDave Leming
16:56 20 Jun 22
John was referred to my wife and I as we began to transition to use Medicare as our insurance options. He was very knowlegeable about all things related to government programs and supplemental options as well. I would strongly recommend his services to anyone requiring such support.
Ed HareEd Hare
14:16 08 Jun 22
John was recommended to us by a friend as we were turning 65 and having to make decisions on our medicare and advantage plan choices.John was thorough, informed, patient and engaged in helping us wade through all the minutia we were receiving to package the best set of programs for our future healthcare needs.We are happy and confident as healthcare needs arise having John at our side.Debi and Ed Hare
Julie SimpsonJulie Simpson
02:36 14 May 22
We selected an awesome advisor in John Claeys! John was dedicated to our needs in counseling our new Insurance choices with Medicare. He is sincere in getting his customers into the program that is best for their situation. John was sincere in explaining the process and we are happy to refer him to others! Steve and Julie Simpson
Sherry HilliardSherry Hilliard
16:55 18 Feb 22
John was extremely helpful when I had to select my Medicare supplemental policy. He is very knowledgeable in the various insurance products. I would recommend John to anyone needing insurance, and in fact, I have recommended him to several of my friends.
Margie SmithMargie Smith
01:08 16 Feb 22
Highly recommend Claeys Group Ins Service, John has assisted with my Medicare supplement and RX choices for past couple years. He is very knowledgeable of the various companies and policies available. Saved money and introduced me with a 5star company.
16:56 10 Feb 22
John came to my house and explained the process of signing up to Medicare in an understandable way. He gave me the steps to take and assisted in the planning. With his help, I got it done. Before he came, it all seemed overwhelming. He's so genuinely nice, and I felt like I had known him for a long time. I highly recommend him, and in fact, already have recommended him to friends and family.
Rebecca NelsonRebecca Nelson
21:00 04 Feb 22
John Claeys is a great individual to work with you on insurance needs. He searched out the best policy and an affordable one that I could handle. He researches every year to be sure I’m getting the most for my money! Highly recommend this group.
Dorys GardensDorys Gardens
12:20 23 Jan 22
John was so pleasant to work with. He explained everything clearly and did not pressure me to make a decision one way or the other. He shopped for the best customized drug plan which will be saving me money in the long run. I highly recommend letting him guide you through the medicare process.

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