Term life insurance may not compare to traditional options

At the start of the new year Americans often look to the future. They spend time thinking about their yearly finances, their income and how they can invest and grow their assets over the next 12 months.

As a result, many consumers will want to compare life insurance quotes and review policies to help protect their families and loved ones in the event of an unfortunate event.

However, those who seek out new policies may want to avoid term life insurance because it can provide a number of drawbacks when compared to traditional coverage options.

In an interview with WalletPop, insurance agent Alan Canton said taking out this policy can be the equivalent of renting a home, and wasting what could have been built up to be a valuable asset. In addition, he says that while it can look like a more inexpensive option to those who compare insurance rates, it excludes some features that could help consumers in the long run.

Canton says the fact that money spent on a term life policy does not go into a forced savings account is a major drawback to the policy. These savings accounts can be beneficial as they earn interest and allow consumers to borrow against accumulated funds, typically at low interest rates, when they fall on hard times.

Additionally, he says when term life coverage runs out, it must be renewed, often at a much higher cost due to factors such as the insured's increasing age and declining health, the news source says.

Canton also says as much as 92 percent of consumers who invest in term life coverage never see any benefits. This is because many let these policies lapse long before they die. As a result, this coverage is more affordable for consumers, because insurers know they do not have to make payouts on these policies, according to the news source.

By comparison, those who invest in whole life insurance can be assured that their families will be well taken care of no matter what happens in the future, as these funds typically don't expire.

However, individuals who purchase a traditional type of coverage also pay much higher rates, which may be out of the price range for many consumers. As a result, these consumers may want to choose a term life policy over leaving their family unprotected.

Consumers who want to invest in life insurance this year can benefit from taking the time to compare quotes from different sources, and choosing the one that best fits both their short-term and long-term financial plans.