Why Short-Term Life Insurance Isn’t a Great Fit

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While buying a life insurance policy has gotten easier over the years, it’s still not like visiting a store and grabbing a product off the shelf. Most life insurance policies take time to process (a process called underwriting) and, in some cases, you may have to wait a month or two before your policy is active. The added expense might also make you hesitant to buy a life insurance policy because of budget constraints or other factors.

You might be tempted to buy a short-term life insurance policy that only provides protection for a period of a few months or years because you’ve heard it’s cheaper and it’s easier to get than a long-term policy. Let’s look at when this might be advisable and when you should consider purchasing a different type of life insurance coverage for the long haul.

Who should buy short-term life insurance?

Short-term life insurance is designed to provide coverage on a temporary basis. The following situations are common reasons for people to purchase short-term life insurance:

You’re waiting on your long-term life insurance policy to be approved.

Remember how a life insurance policy can take some time to be approved? Sometimes an insurer will offer you temporary coverage while you wait for your longer-term policy to take effect. This policy usually mirrors your primary policy in terms of coverage amount and begins as soon as you pay your first premium.

You’re temporarily unemployed or between jobs.

If you get life insurance through your employer and are between jobs, a temporary life insurance policy can provide you much-needed protection in case something happens to you in the interim. Once you enroll in your company’s group life insurance policy, you can cancel the short-term insurance.

You’re currently making improvements to your health or lifestyle.

Life insurance rates are based on both your current health and your medical history, and making lifestyle improvements or changes can be an effective way to cut your premium costs. If you’re in the process of losing weight, recovering from an illness or trying to quit smoking, it may make sense to buy a short-term life insurance policy. Once you’ve crossed the finish line for your health goals, you can apply for traditional life insurance and score a lower premium rate due to an improved health classification.

You’re a temporary worker with a dangerous job.

Getting a dangerous job—such as working as a firefighter, logger or coal miner—can make applying for insurance challenging. Premiums for people with dangerous occupations are often significantly higher. Instead of locking in premiums for a term life or whole life insurance policy based on your current, temporary role, you can buy short-term insurance today. Once you’re done with the job, you can shop for lower premiums.

What kinds of short-term life insurance policies are available?

Most people who buy short-term life insurance tend to purchase it in one of two forms: annual renewable life insurance and temporary life insurance.

Annual renewable life insurance has term lengths of one year and renews on a yearly basis. The premiums for this type of policy are often even lower than traditional term life insurance, but they increase each year you renew the policy. 

If you plan on buying life insurance for longer than a few years, it makes more sense to purchase a five-year term life insurance policy to lock in your premiums. Annual renewable life insurance is a good fit for people who:

  • Want to lose weight
  • Are convicted of a felony and waiting for a probationary period to end
  • Are in the third trimester of pregnancy or are brand new parents

Temporary life insurance is used by insurance companies to help fulfill the coverage gap that exists between when you apply for a traditional life insurance policy and pay your first premium. You can’t purchase it as standalone coverage and the amount you receive is based on the term or permanent policy you’re buying from the insurance company.

Are there alternatives to short-term life insurance?

If you need life insurance for the long haul (like most people do), buying term life insurance or permanent life insurance is often viewed as a better way to protect your family. In addition to locking in your rates for the length of your policy, these insurance options can provide higher policy limits.

Term Life Insurance

Term life insurance is an affordable insurance option for most people and is available in several different varieties. Even if you’re not looking to commit to a life insurance policy that covers you for decades, you can find a term life option that works for you. Five-year policies are available, and you can often renew them at the conclusion of the term. Coverage lasts as long as you pay your insurance premiums. If you decide it’s a good fit, you can also explore 10-year terms, 20-year terms or 30-year terms.

Permanent Life Insurance and Whole Life Insurance

Permanent life insurance policies like whole life insurance and universal life insurance don’t expire as long as you pay the premiums, which means you can buy a policy at age 25 and carry it for the whole length of your life. These policies can also accrue a cash value that you can borrow against or withdraw. Permanent and whole life insurance policies do have higher premiums than term life policies, but the trade-off is life insurance that covers you for the rest of your life.

SelectQuote Can Find a Policy to Meet Your Long-Term and Short-Term Life Insurance Needs

If you’re considering buying an annual renewable life insurance policy for reasons not outlined above, you may want to look at a five-year term life insurance policy instead. If you’re concerned about having life insurance while waiting for approval for your term life or whole life policy, it makes sense to ask about temporary life insurance coverage.

SelectQuote can help you compare life insurance rates from several companies at once, whether you’re shopping for an annual renewable, term life or whole life insurance policy. We can even help you find a carrier that offers temporary coverage while waiting for your policy to be approved. 

We do the shopping. You do the saving.