Term Life Insurance Comparisons for Young Adults

Term life insurance comparisons for young adults with growing families should focus on more than just affordability. Many contracts have widely divergent features and riders, making valid comparisons based on cost alone very misleading. Finding a configuration that addresses the key need of your circumstances may be more valuable. 

Young adults with children might compare four term life insurance components:

• Comparison to permanent coverage: whole, universal, etc.
• Features: periods, renewability, convertibility, accelerated death benefit
• Riders: waiver of premium, accidental death, spousal coverage, dependent children coverage
• Quotes: compare premium rates

You should also compare term life insurance to permanent cash value policies: whole life, universal life, etc.

Term life insurance offers the highest death benefit for the lowest cost when compared to other types of contracts. Premiums are level for the specified time period, it pays the death benefit if the insured dies within the designated time period, and there is no cash accumulation.

Term addresses temporary needs. It makes the most sense for young adults when the need for coverage will disappear, such as once college funding needs have been met, or once your assets have grown to sustain the family. It addresses the question of: "what if I pass away prior to funding college expenses?", or "what if I die with insufficient assets for my spouse?"

Permanent cash value contracts cover the inevitable: when I stop working, and when I start pushing up daisies. These policies remain in force until these events occur.

It is also important for young adults to compare term life insurance features built into the base policy: time limit flexibility, renewability, convertibility to cash value plans, and accelerated death benefits.

Term life insurance provides a guaranteed level premium for a specified time period: 5, 10, 20, and 30 year terms are quite common. It is important to understand what happens when your term expires, and how this relates to your temporary needs. Remember that by the time your policy expires you will not longer be a young adult. Longer time periods will have higher initial premiums, but may prove most cost effective over time if your temporary needs will last longer.

You need to understand what happens when your policy expires. Will you be able to continue coverage without evidence of insurability?  What will your rates look like compared to today’s rates?  We often underestimate how long our temporary needs my last. As a time limit nears its end, many couples find themselves wishing they had selected a longer term because their health has changed. 

Many policies give you the option of converting to a cash value plan either at specified intervals, or at any time during the contract – often without evidence of insurability. You can start with smaller premiums, and then extend the duration of the policy if needed.

An accelerated death benefit allows you to use a portion of your death benefit if you are diagnosed with a terminal illness.

Accidental death rider provides an additional death benefit if the insured dies as a result of an accident. This is a popular option for many young adults engaged in extreme sports, high-risk occupations, and other outdoor activities. The death benefit may double if you die while a fare-paying passenger in a taxi cab, aircraft, boat, or train. 

The accidental death rider is a great option to purchase larger death benefit amounts at affordable rates. The premiums are often quite low compared to the base policy, and rates are not based upon health. There is often no additional requirement to show good health to purchase this extra option.