Term Life insurance is the most popular form of life insurance purchased in the US. But what makes it so popular and why do so many people buy it? Perhaps price is the main reason. Term insurance coverage is not just less expensive than a traditional whole-life policy. It’s substantially less expensive. Often, the difference in premium is thousands of dollars per year, and tens of thousands of dollars over one’s lifetime.

For example, the annual cost for $250,000 of term life insurance on a non-smoking healthy 40 year-old male is approximately $200-$250 per year. This assumes no major medical conditions and the rate is guaranteed not to increase for 20 years.  A Universal Life or Whole Life insurance policy for the same amount will cost between $2,800 and $4,000 per year. Of course, the Universal Life and Whole Life policies will gradually build cash value. However, accumulating cash in your Roth IRA or 401K may prove to be the perfect companion for your term coverage.

Whole Life, Universal Life and Variable Life insurance policies still should be considered when evaluating your personal finances. They feature certain advantages such as equity building and permanent death protection. But if accumulating cash for retirement is a priority, these types of policies may not be the best option.

Undeniably, term life insurance is also the simplest and purest form of insurance. If you pay the premium, the death benefit will be paid. If you don’t pay the premium, your coverage ends. There are no penalties and no outstanding taxes. The term is usually between 1 year and 20 years and almost always renewable.

Certainly, we are not suggesting that this type of coverage is the perfect fit for everyone. But it is the most efficient and inexpensive method to provide large amounts of death benefit at an affordable cost. Term insurance is also one of the most customizable types of life insurance, allowing you to buy precisely the exact amount of needed coverage.