Pros
- It offers a lump sum payout. Your benefit's paid in one go, meaning your family has flexibilty with how they can use the money. It could be used to pay off debts such as the mortgage or credit cards. Or to maintain your family's lifestyle, such as your children's education costs.
- You can be paid out if you get a terminal illness. If a medical practitioner expects you to die within 12 months, your policy can pay out the benefit as an advance payment. A terminal illness payment can help with medical bills, funeral costs or even as a cash gift.
- Your policy can be renewed each year. Most policies can be renewed until you reach the age of 99, if necessary.
- Policies can be straightforward. Exclusions are fairly limited with term life insurance. One common exclusion is a passing from suicide in the first 13 months of a policy. Otherwise, your family will usually be able to rely on a cash payout if you die during the policy term.
Cons
- There's no benefit once the term ends. If you outlive your term insurance policy, it'll expire. Your beneficiaries won't receive any cash out or death benefit. (It's a key reason why term life insurance is competitively priced.)
- Regular renewals and rising costs. Term life insurance is not a 'set and forget' insurance product. As a policy is only valid for the term you've chosen, when the policy expires at the end of that term you need to take out a new policy if you want to continue to be covered. At the end of the term, you're older than you were when you first applied, it could well make finding a new policy more expensive.
- Your premium will directly reflect your lifestyle. Your premiums will be based on the level of risk you present to your insurer. If you smoke, engage in high-risk activities or work in a dangerous occupation, you can expect to pay more than others.
