Is term life insurance a waste of money?

Man looking at documents with unsure expression.

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Getting nothing from your term life policy is actually a good thing.

Key points

  • Term life insurance does not accumulate a cash value.
  • Although you may not get a payout with term life insurance, it pays to have coverage.

Setting up a life insurance policy is a great way to protect the people you care about. But there are different types of life insurance you may be considering.

Term life insurance covers you for a set period of time or term. That term can be 10 years, 20 years or 30 years; It depends on what you sign up for.

Whole life insurance, on the other hand, covers you for the rest of your life. You also build up cash value that you can access or borrow in the future.

Term life insurance is much cheaper than whole life insurance because it eventually runs out and doesn’t build up a cash value. Because of this, you may assume that term life insurance is a waste of money. But in reality, term life insurance offers a lot of value in its own right.

Term life insurance provides peace of mind

If you get term life insurance and you don’t die before your term expires, then you won’t get a dime from your insurance company. On the one hand, that’s a good thing: It means he didn’t pass away at a relatively young age. But from a financial perspective, you may feel like you’re being scammed. After all, you’re paying premiums for all these years and not getting paid at the end of the day.

What you should know about term life insurance, however, is that it offers you something very important: protection for your loved ones and peace of mind. If you buy a 30-year term life insurance policy at age 30 and you’re still alive at age 60, you shouldn’t assume the attitude that you didn’t get anything from your policy, because you really did. What you got was 30 years of protection in the event of your untimely death, which fortunately did not come to pass. And there is a lot of value in that.

It’s also worth noting that while permanent life insurance builds cash value and is designed to pay you something at some point, getting that payment depends on being able to maintain your policy. Whole life insurance premiums can be so expensive that they often force policyholders into a situation where they can no longer pay.

At that point, those policyholders lose their coverage and get none of that money. Compare that to term life insurance, which is much more affordable, and it’s easy to defend a policy that doesn’t build cash value but nevertheless offers solid protection.

Protect the people you care about most

The purpose of term life insurance is not to get a big payday. It is to ensure that your loved ones are financially protected in the event of your death. Once you recognize that, it becomes much easier to justify the cost of a policy that doesn’t build cash value in the same way that whole life insurance does.

Life insurance protection for you and your family

While many varieties of insurance coverage are designed to help protect a person’s family and assets, life insurance is a vital type of protection. The right life insurance can help protect the people who depend on you the most if you pass away. Choosing the right life insurance policy is critical to ensuring that your loved ones are adequately protected. We’ve ranked the various options to give you our picks for the best life insurance policies available today.

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