When Is Term Insurance Most Appropriate?

Permanent insurance has its advantages, but it may not be appropriate for everyone's personal financial situation. There are two scenarios where term insurance makes the most sense:

1) You need a lot of insurance coverage but do not have much discretionary income left over each month. For example, if you are the main breadwinner supporting a spouse and children, you will need a significant amount of death benefit. This would be a fairly big outlay with permanent insurance. It is a worthwhile investment if you can afford it, but if you can't, you still need the coverage, so term insurance is the next best option. Term insurance will provide the maximum coverage for the lowest outlay of premiums.

2) If you cannot afford permanent life insurance but would like to secure your insurability, term life insurance is a terrific option. You will want to purchase a term life insurance policy with a company that also has a strong permanent life insurance product so that you can convert your term policy to a permanent policy and still maintain your age of insurability. Your age of insurability is the age at which you originally purchased the term insurance. This means that once you are able to afford permanent insurance, your premiums should be at the rate of your age when you purchased the term policy. Also, if you later pick up a serious medical condition, you are still able to convert your term life into permanent coverage. So if you are young and healthy, now is the best time to purchase insurance, be it term or permanent!