Is Temporary Life Insurance Worth It?

Updated on April 29, 2022

Temporary life insurance, also known as a temporary insurance agreement (TIA), is a sort of short-term life insurance that is only available during the application process for life insurance. The interim coverage pays out to your beneficiaries if you pass away before your final application is accepted. Temporary coverage is only provided while you wait for your final insurance to take effect, and it is not offered separately.

Term life insurance and temporary life insurance are frequently confused, and some people use the phrases interchangeably. Yet, temporary life insurance is the sort of coverage that allows you to remain insured while transitioning between life insurance policies. This policy is often provided as part of the overall underwriting procedure for your term or permanent insurance policy. 

This article will explain why you might need temporary insurance and how reasonable it is compared to other types of term life insurance quotes.

How Does Temporary Insurance Work?

Temporary life insurance protects you while you wait for your term or permanent policy to take effect. You’ll be asked questions about your physical health while applying for temporary life insurance, just as you would for coverage under a standard policy. 

Even if you’re still covered under your main plan, several medical issues may disqualify you from temporary coverage. Here are some scenarios to help decide when and if you should purchase short-term life insurance.

You’re Waiting on a Long-term Policy

If your insurance company gives you temporary life insurance while you apply for a traditional policy, it’s usually worth taking. When you pay your first premium, your policy enters into force, and it usually gives the same level of coverage as the primary policy you’re looking for.

You’re Between Jobs

According to LIMRA’s 2021 Insurance Barometer Study, more than half of working Americans have life insurance through their employer. If you need to fill a coverage gap before returning to work or starting a new job, an ART policy may be able to help. You can terminate your short-term coverage whenever you’re able to enroll in group life insurance through your new workplace.

You’re Temporarily Working a Hazardous Job

If you work in a dangerous environment every day, insurers may charge you a higher premium. You might be better off with short-term coverage if you’re working a dangerous job like mining or logging for a short period of time. After you’ve finished that job, you can look for lower-cost premiums.

You Have Other Temporary Life Insurance Needs

Perhaps you require life insurance as a condition of your divorce settlement. Life insurance terms and rates for basic coverage could be higher than usual because you’re on probation or because you’ve been diagnosed with a disease while pregnant. In these circumstances, short-term coverage may be sufficient to meet your needs without committing you to a lengthier insurance policy.

Making the Right Life Decision

Is purchasing a life insurance policy worthwhile? Term life insurance, which is most commonly used for temporary, short-term necessities like your mortgage, may be more affordable depending on your circumstances. Alternatively, you might choose the everlasting protection and cash value of most permanent life insurance policies.

Here are some reasons why temporary plans are worth considering for insurance shoppers to assist in determining what is suitable for you.

More Flexible

When it comes to deciding how long your term life insurance should continue, you have a lot of alternatives. In most cases, you can purchase coverage for one, five, ten, fifteen, twenty-five, twenty-five, or thirty years. 

Short-term obligations or current expenses, such as a child’s tuition, can be covered by policies that last one to five years. A 30-year term can be a better fit if you’re the breadwinner and want insurance to cover your mortgage. These requirements may fade away with time, as may your need for insurance.

Multiple Death Benefit Payouts

The family’s breadwinner may be responsible for a variety of debts and EMIs, such as a car loan or a home loan, among other things. As a result, when the family’s breadwinner dies, the family will be held liable. This is where the temporary insurance benefit will come in handy. 

With the many payouts choices, the nominee will get a lump sum payment, which will be used to pay off any outstanding debts and provide peace of mind to the family. There is also the option of receiving monthly income in addition to the lump-sum death compensation.

Less Expensive

Because term policies provide coverage for a certain amount of time, temporary life insurance premiums are generally lower than whole life insurance rates. If you outlive the term and the policy expires, your beneficiaries won’t receive the death benefit, so the insurer faces less risk. 

By contrast, whole life insurance premiums are greater because the policies payout regardless of when you die. Term life insurance is offered by all of the finest life insurance firms.

Good for Young Families

Temporary life insurance is a good alternative for young families searching for temporary coverage because it only lasts for a set amount of time and is generally less expensive than permanent life insurance. For example, you can purchase a policy to cover the years when your family financially relies on you and reduce your coverage once your children are self-sufficient.

Reliable for Small Business Owners

Life insurance may be all you need if you have a family and run your firm alone (or with only one partner). It can be utilized to protect your family as well as your company. A small business owner’s life insurance policy might offer funding to keep the doors “open” and pay off any business debts or debt you’ve incurred. 

Furthermore, proceeds from a life insurance policy can be used to pay rent and other office expenditures. It can also be used to pay for a wage for someone to take over your company’s day-to-day operations.

Is Temporary Life Insurance Worth It?

You’re purchasing life insurance to safeguard the income you provide for your dependents. Even if you die before finishing the life insurance application process, a temporary life insurance coverage ensures that your loved ones will get a death benefit – making it absolutely worth it.

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