What is short-term life insurance, and is it a good idea?
Let’s dive into the details
If you’re like us, you spend a lot of your time thinking and wondering about life insurance. (No?)
And one question you might have is: What happens after I apply for life insurance, but before my policy officially goes into place? And a natural follow-up question would be: What if I die during that time period, which can last weeks or even months?
Rest easy. There’s an answer on how to fill that gap, so your family is protected on the off-chance something happens to you while you’re waiting for your application to be approved, and your policy to go into place.
And it turns out, that same answer is also helpful for people who don’t qualify for, or can’t afford, traditional life insurance policies. It’s also useful if you are going on a high-risk trip, and want extra life insurance coverage for the duration of your journey.
That answer? Short-term life insurance. Learn more about what short-term life insurance is, why you might need it, and alternatives to consider if it isn’t the best decision for you.
In this article:
What is short-term life insurance?
Unlike traditional life insurance coverage that lasts anywhere from a few years to the rest of your life, short-term life insurance has an ending date, often within five years or less. Short-term life insurance isn’t necessarily a one-and-done deal, though — depending on the type of policy, you can extend your plan annually.
Types of short-term life insurance
Temporary short-term coverage
Temporary short-term life insurance coverage (TLIC) offers immediate coverage during the life insurance application process
If you buy a traditional life insurance policy, that policy won’t go into effect until you’re approved. That can take weeks, and not everyone is comfortable waiting this long for coverage to begin. A temporary short-term life insurance plan provides peace of mind while waiting for a traditional policy’s underwriting period to complete.
Many insurers, including Haven Life, will offer you temporary coverage for the same amount of coverage you’re applying for, up to $1 million. You’ll pay the same premium you’ll eventually pay if your application is approved. Once your payment goes through, you’re covered — which is great in case the unexpected comes to pass.
Better yet, there’s basically no downside. If your application is declined, or you decide not to accept the policy and rate offered, Haven Life will give you a full refund for this temporary coverage.
Renewable short-term life coverage
They sound similar, but renewable term life insurance coverage is separate from the temporary coverage mentioned above. These short-term life insurance policies don’t have a set-in-stone completion date — if your temporary situation happens to last longer than expected, a renewable short-term policy lets you extend your coverage by renewing your policy.
You can then renew this type of short-term insurance, usually on an annual basis, without having to reapply for the coverage or go through a medical exam. But because you will be older, and possibly less healthy, you will likely pay a higher premium for this coverage.
Also, while it might be cost-effective for you to purchase a renewable short-term life insurance policy now, this type of coverage can cost you more in the long run if you continually renew. That’s because traditional level term life insurance policies let you lock in the same rate throughout the life of a policy — meaning you’ll pay the same monthly premium for the entire term, potentially up to 30 years.
If you buy a term life insurance policy while you’re young and healthy, you’ll be locking in a lower rate that, again, could last for decades.
When should you consider short-term life insurance?
Now that you know more about what short-term life insurance is and the options available to you, consider the following situations when this coverage might make sense:
- Before a long-term policy is in place coverage: If you purchase a traditional insurance policy, you’ll have a gap in coverage between when you sign up and when coverage takes effect. This is the perfect situation for temporary coverage.
- You’re between jobs: Life insurance is often included as part of an employee benefits package. But if you’re between jobs, a temporary policy may be a good fit to fill that coverage gap.
- You’re young and healthy: If you’re a young and healthy adult just starting out in the workforce, low-cost annual renewable policies may be a great fit until you’ve established a meaningful, stable income, and / or taken on long-term expenses like a mortgage or having kids.
- You need to improve your lifestyle: Your health and how you maintain it are often deciding factors in your insurance premium. If you’re working on lifestyle changes to improve your health, and therefore reduce your premiums, it may be a good idea to take out a temporary policy as you make those changes. Then you can lock in a lower rate on a term or permanent policy once you’ve done so.
- You have an upcoming high-risk trip: If you engage in risky habits (or have a high-risk occupation), getting approved for traditional life insurance might be difficult — you’ll pay a high premium, or even be denied coverage. But if you know that your risk is finite — a one-time trip, for example — it might make sense to get short-term coverage, if you can.
Alternatives to short-term life insurance
Term life insurance
With traditional term life insurance, you typically have access to higher coverage amounts than short-term coverage. (At Haven Life, you might be eligible for up to $3 million in coverage.)
Term life insurance policies can range from 10 to 30 years, and you pay level term premiums: That is, you pay the same rate throughout the life of the policy.
Term life is typically the most affordable type of life insurance because you only pay for the coverage you need during the years when you need it. Many people choose term lengths that cover the years when their kids still live at home, when they’re paying off a mortgage, and before they retire from the workforce.
This is because these are the years when you’re a) drawing a salary; b) paying for things for other people (such as a child, a spouse, or other relatives who depend on you). Term life insurance is a smart way to help cover those expenses in case something happens to you, without having to pay for coverage when you no longer need it.
Whole life Insurance
Whole life insurance (a form of permanent life insurance) has no term ending date. It remains effective for the rest of your life, no matter how long that may be. When comparing premiums to benefits, these policies are typically more expensive than term life policies.
That’s because they don’t expire (and therefore cover the years when you’re older and likely to be in worse health), and because they often accumulate cash value over the life of the policy. You can borrow against that cash value, but it might impact the death benefit your loved ones receive, or cause tax ramifications.
Where Haven Life comes in
Haven Life offers traditional term life insurance, including the aforementioned temporary coverage to provide financial protection during the application process. Again, this is one of the most affordable types of life insurance around, and we’ve made it simpler by moving the entire application process online. (Some applicants might even get a coverage decision within minutes, without undergoing a medical exam, though you’ll need to be truthful on your application.)
Start by getting a free online life insurance quote today.
About Joshua RodriguezRead more by Joshua Rodriguez
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus
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