5 Situations That Term Life Insurance Would Cover Best

Five Situations That Term Life Insurance Would Cover Best

Term life insurance is the flexible, affordable counterpart to whole life insurance.

Rather than rope yourself into a complex investment with a long-term contract, term life enables you to secure the pure protection you need for a set term lasting anywhere from 5 to 30 years. You can change your policy at any time, and will gain peace of mind knowing that you’re protecting your family from possible financial hardship if you were to die.

In many cases, it’s actually ideal to have term instead of whole life.

Here are five hypothetical situations in which term life would be the ideal life insurance coverage to have.

Quick Article Guide

1. Mortgage Protection
2. College Costs
3. Pre-Inheritance
4. Pre-Retirement
5. Short-Term Debt
6. Conclusion

1. Mortgage Protection

Joe and his wife, Jane, buy a house with a $300,000 mortgage over 15 years. Joe needs life insurance to ensure that if he dies, Jane has a way to pay the mortgage.

With whole life insurance, Joe could be paying a high premium for the rest of his life, possibly even after the mortgage is paid off. So instead, Joe gets a term life policy with a $300,000 death benefit and a 30-year term, specifically to match the mortgage.

Even as Joe and Jane pay down the mortgage, the $300,000 death benefit remains the same. So if Joe dies with $100,000 left on the mortgage, $100,000 will be used to pay the mortgage, and the other $200,000 will go to Jane. If Joe outlives his 30-year term, he has also outlived the need to shield Jane from the mortgage, and thus can shop for a new policy that will suit his needs at this point in his life.

2. College Costs

Joe and Jane co-sign student loans for their 18-year-old son, Jimmy, to go to college. Joe is the co-signer. Jimmy also plans to attend graduate school, bringing his estimated student loan debt for undergraduate and graduate studies to $200,000.

If Joe dies without life insurance, the loans fall on Jimmy, and Jane has no way to help. Once again, whole life insurance proves ineffective as it carries both a hefty price tag and the potential to outlast the loans. Therefore, Joe purchases a $200,000 term life policy with a 10-year term.

That way, Jimmy is protected well through college and into his professional career when he will then have the financial resources to pay off the remaining loans unassisted.

3. Pre-Inheritance

Joe is in line to receive a $3 million fortune when his 90-year-old father, Jack, dies. In the meantime, Joe and Jane live moderately. Since Joe technically doesn’t have that money yet, he gets anxious when he realizes that Jane not only doesn’t see the inheritance, but has no financial assistance at all, if he dies unexpectedly before his father.

Joe will likely become what we call “self-insured” if he lives to see his inheritance, meaning he won’t need any life insurance at all because he is already passing down enough money for his family to support themselves. But until his father dies, Joe undoubtedly needs life insurance. Luckily, he is able to find the perfect 10-year term life policy with a $1 million death benefit, rather than buying a whole life policy that he won’t need later on down the road.

4. Pre-Retirement

Joe is 40 years old, fairly far off from retirement. He knows he needs life insurance, but doesn’t want to buy a whole life policy because once he retires, he and his family will have access to his retirement fund. He will still need life insurance at that time, but might not need as much. Instead of a $1 million death benefit, he might only need $250,000—or he may even become self-insured if he accumulates other significant assets in between ages 40 and 65.

With term life insurance, Joe is able to get a 25-year term that leads him right into retirement. As the term’s end date nears, he will have a clearer picture of what type of life insurance policy he will need during retirement.

5. Short-Term Debt

Joe takes out a $100,000 loan to start a business. If he dies, his wife, Jane is responsible for paying off the loan.

Had Joe taken out a smaller loan of roughly $50,000, life insurance probably wouldn’t have been a viable option to protect Jane. But for larger investments like this, Joe should get a term policy of at least $100,000, and a term length equal to or greater than the number of years it will take him to pay off the loan.


These are just a few scenarios that lend themselves well to term life insurance. There are indeed times when whole life proves to be the better option, and you shouldn’t try to navigate the nuances of life insurance on your own.

An independent agency like JRC Insurance can help you find the best policy for your needs.

Click here to get a free life insurance quote today, or call us at 855-247-9555 to get expert advice from one of our friendly and experienced agents.

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Cliff Pendell

VP of Marketing at JRC Insurance Group
Cliff is a Managing Partner and Co-Founder at JRC. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.
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