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Short-Term Life Insurance: Pros and Cons

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Short-term life insurance can offer an affordable solution for most of your life insurance needs in between your regular coverage.

Short-term life insurance is a type of life insurance policy designed to cover individuals for a short period of time when there is a gap in coverage, often with less than a year length of time.

These policies are commonly used to provide financial security and stability in case there are any types of accidents or unforeseen deaths that occur in between coverage periods.

Types of Short-Term Life Insurance

Because over 48% of adults don’t have any type of life insurance, it’s important to consider it for yourself.

Temporary life insurance and annual renewable life insurance are two commonly bought policies for short-term life insurance. Both have their own strengths and drawbacks, so here is a quick breakdown of each type.

Annual Renewable Life Insurance

Annual renewable life insurance has a term length of one year with the option for renewal on an annual basis.

It works similarly to standard term life insurance. However, premiums are often much lower than traditional term life, making it a great option if you’re in between your standard life insurance policy.

Other reasons to consider an annual renewable policy may include:

  • Losing weight or having recently lost weight for health reasons
  • Quitting smoking or are a former smoker
  • Convicted of a felony and are waiting for your probationary period to end
  • In the third trimester of your pregnancy or recently had a child

These will all affect your regular life insurance policy rates, as well as determine your coverage levels. You’ll need to check your policy’s stipulations if you’re experiencing any of the listed health and lifestyle changes.

Annual renewal rates for an annual renewable life insurance policy will increase if you do decide to renew your policy at the end of the year, so be aware of this as well.

Temporary Life Insurance

Most people will experience a gap in coverage between the time when they initially apply for life insurance and when their policy goes into effect. This is known as the waiting period. Gaps between coverage never typically last long, usually averaging out to about two to three weeks at a time.

However, if you’re worried about your coverage for those in-between stages, temporary life insurance can provide some of the same coverage as a standard policy while you wait for yours to go into effect.

There are some drawbacks, though.

Because the application process for temporary life insurance requires an interview, medical exam, and final underwriting decision from the insurance provider, it can take a bit longer to receive coverage. It can sometimes take up to five or six weeks depending on if the underwriter requires additional information.

Since there is such an extensive process, temporary life insurance really works best if you know ahead of time when your standard policy will end. This means you start the process of applying and completing your temporary life insurance application before your standard policy ends.

Should I buy short-term life insurance?

The answer to this question will depend on a few factors. Short-term life insurance is meant to deal with coverage gaps during transitions. If you aren’t anticipating a long gap in coverage, short-term life insurance may not be the way to go.

However, here are some instances to consider:

  • Covering a short-term debt: A short-term life insurance policy can provide peace of mind if you pass away during that period of time, and your beneficiary will be able to receive your death benefits and pay off your debt for you.
  • Between jobs: If your life insurance is tied to your employment and you lose your job or switch companies, you may need short-term life insurance until you’re eligible for a policy with your new employer.
  • Working a dangerous temporary job: If you’re working a dangerous job temporarily, you might want to get short-term life insurance.
  • Temporary life changes: This covers anything from a divorce to being between jobs or expecting to be temporarily in a riskier environment.
  • Improving your health and lifestyle: If you are working on losing weight, quitting smoking, or doing other things to improve your health, a temporary policy can provide coverage until you’re ready to apply for a long-term life insurance policy in better health.

These are all circumstances that should be considered when considering buying a short-term policy.

What other life insurance options are there?

Just like short-term insurance, there are other ways to deal with gaps in coverage besides having a short-term life insurance policy:

  • Term life insurance: Term life policies offer relatively cheap premiums compared to other life insurance types. Depending on your circumstances, you may benefit from extending your short-term policy into a longer one like term life.
  • Permanent life insurance: Some of these policies come with cash value components in the form of an investment portfolio. While these policies may present a small coverage gap, once they’re established, they remain in effect for as long as the premiums are paid or until the insured individual passes away.

If you need coverage that lasts more than a few months to a year, you may benefit from either a term life or permanent life policy.

How much does short-term life insurance cover?

The average cost for short-term insurance will vary based on how long you plan to have it, as well as what type of benefits you are looking for in terms of coverage.

Here’s a quick breakdown:

Company Coverage Amount
SymetraUp to $250,000
Brighthouse; Lincoln FinancialUp to $500,000
AIG; Banner Life; Mutual of Omaha; Pacific Life; Protective; Prudential; SLBI; TransamericaUp to $1 million
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Since there is a wide variety of coverage options available, it’s best to shop around to see which one fits your needs best.

Short-Term Life Insurance: Pros and Cons: Key Takeaways

Since life is unpredictable at times, it’s in your best interest to secure a long-term life insurance policy. Some of the best life insurance policies offer a wide array of options to choose from, so finding one that fits your needs won’t be hard.

However, if you’re waiting for a policy to go into effect or hoping to earn a better rate by delaying buying a long-term policy, a short-term life insurance policy will help hold you over until you are ready for the commitment of a long-term policy.




Katherine Warnock

Katherine is a freelance editorial writer with a degree in Advanced Technical and Development Writing from SUNY Adirondack. She has years experience writing on topics such as finance, insurance, and personal development.

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