Short Term Life Insurance | The bank rate
Life insurance can be a great financial safety net, but sometimes there are gaps in coverage. Maybe you’re in between jobs and could use a short-term life insurance policy, for example. Whatever the cause, there may be times when you need a life insurance policy that only covers a short period. This is where short term life insurance can come in handy.
What is short term life insurance?
There are two types of life insurance policies: a term or a permanent policy. Short-term life insurance is a type of policy designed to cover individuals for a short period, often less than a year. These policies are commonly used to eliminate temporary gaps in coverage so that you don’t miss out on the financial security that a life insurance policy provides. A common example is when you are waiting for a long term life insurance policy to become active, or if you are in between jobs. Term life insurance and annual revolving life insurance are two common types of short term life insurance that are options if these situations arise.
Types of short-term life insurance
Term life insurance
Term life insurance is offered upstream of certain long-term life insurance policies. It takes effect immediately and lasts until the end of the subscription to the main plan. The purpose of this type of short-term insurance is to keep a client covered while a traditional life insurance policy takes effect.
Renewable annual life insurance
As the name suggests, annually renewable life insurance policies are short-term one-year life insurance plans that must be renewed annually or discontinued. Annual renewable plans fall under the category of term life insurance. When applying for a term life insurance policy, depending on the company, you may be able to request that it be structured as an annual revolving policy. Rather than locking in a level premium for 10 years (or more), an annual renewable policy premium will increase each year as it is renewed. While this can benefit someone who wants coverage now, the costs increase over time.
When is short term life insurance a good idea?
The first thing to remember is that short term life insurance is meant to fill gaps in coverage during transitions. That said, there are some obvious situations where short term life insurance makes sense.
- Cover short-term debt: If you are working to pay off debt, a short term life insurance policy can give you peace of mind until it is fully paid. If you die during this time, your beneficiary will receive the death benefit and can pay off your debt. Otherwise, the policy will end and will have served its purpose.
- Between jobs: If your life insurance is tied to your job, you may need short-term life insurance until you qualify for a policy with your new employer.
- Work dangerous temporary work: The riskier your job, the more you could pay for life insurance. If you are temporarily doing hazardous work, you can purchase short-term life insurance and then apply for a long-term policy when the job is done.
- Temporary life changes: Maybe you’ve just got a divorce and need to get life insurance. Or maybe you have temporary changes in your life, for example between jobs, or expect to be temporarily in a more risky environment (travel on a mission abroad, for example). A short term life insurance policy can cover you until your temporary life change is resolved and you can get a traditional life insurance policy.
- Improve your health and lifestyle: Your height, weight, smoking status, and general health are all taken into account by life insurers. If you’re working out to lose weight, quit smoking, or do other things to improve your health, a term policy can provide you with coverage until you’re ready to purchase a life insurance policy. longer term healthier. For a healthy young adult looking for the lowest possible budget option, an annual revolving policy may be a good short-term solution.
Alternatives to short-term life insurance
Short-term life insurance is designed as a sort of second-best option in life insurance, not as an alternative to long-term life insurance. That said, there are other ways to fill these gaps in coverage besides having a short term life insurance policy.
Although short-term or annually renewable policies are technically considered term life insurance policies, you can generally choose to extend the term of coverage beyond a single year. Term life insurance policies offer relatively cheap premiums compared to other types of life insurance because a payment is less likely to be incurred. Depending on your situation, you may benefit from a short-term extension of your policy over a decade or more to meet your needs.
Whole or universal life insurance can cover an individual’s entire life. Some of these policies have cash value components in the form of an investment portfolio. While these policies may have a small gap in coverage initially, once in place, they remain in effect for as long as premiums are paid or until the death of the insured.
Frequently Asked Questions
What is the best life insurance?
The best life insurance policy may vary depending on your coverage needs, medical condition, and age. By comparing multiple insurance companies on the basis of third party ratings for customer experience and financial strength, as well as policy options, you will be able to determine which provider is best suited to protect your financial interests.
When do i need short term life insurance?
If you experience a gap in life insurance coverage, such as when you change jobs or wait for a long-term policy to take effect, it may be worth considering a life insurance policy. short term life insurance to fill this gap.
Is Short Term Life Insurance Worth It?
Depending on the situation, short-term life insurance may be worth it. However, it is not a viable replacement for longer term life insurance.