What Is Direct Term Life Insurance?

Everything you need to know about direct term life insurance and how it can benefit you.
By Mike Parker
Updated Jul 31, 2022
A woman signing up for Direct Term Life Insurance.
Why trust our opinion?

Our content follows strict guidelines for editorial accuracy and integrity. Learn about our and how we make money.

It might be hard to believe, but in the future, most people won't talk to insurance agents to get coverage.

And that's not always a bad thing. With people all over the world trying to do everything "hands-free," this is where direct term life insurance comes in. It shows what insurance will look like in the future.

In this article, we will help you understand what direct term life insurance is, how it works, what it covers, and determine if it's the right insurance option for you.

A person signing up for Direct Term Life Insurance.

Source: Unsplash

What Is Term Life Insurance?

It is very important to understand term life insurance plans before getting into direct term life insurance. 

Term insurance is an agreement between the insurer and the policyholder, where if the policyholder dies during the policy’s term, a specified amount is paid to the beneficiary. 

Term life insurance protects the policyholder for a set amount of time — usually 10, 20, or 30 years. But if they die after the term has ended, the policy doesn’t pay out.

For example, term life insurance policies can cover the policyholder for anywhere from five to 40 years, depending on what they decide on. 

If you want to keep your insurance after the policy runs out, you can either pay more to keep it going or let the policy expire.

What Is Direct Term Life Insurance?

If you want to understand direct term life insurance, it might be easiest to think of it by its other name: direct-to-customer (DTC) insurance.

As the name suggests, it is a term life insurance that you buy directly from a life insurance company. You don't have to go through an agent or another kind of intermediary to buy it.

In the past, buying life insurance meant going to a life insurance agent in person and waiting for weeks or months for the paperwork to be processed.

However, in the modern world, you can buy anything from clothes to cars online, so you might also not want to spend that much time getting life insurance coverage. This is why direct-term life insurance exists.

You can usually buy direct term life insurance online or over the phone. If you want to get covered when it's convenient for you, this is an easy way to do so.

A woman researching how Direct Life Insurance works.

Source: Pexels

How Does Direct Term Life Insurance Work?

In the event that you die while your direct term life insurance policy is still in effect, your family will get money from your insurance policy based on your amount of coverage. They can use the money to pay for short- or long-term financial needs.

Term life insurance is the cheapest, most flexible, and easiest type of insurance to buy, which is why many families choose it.

Because term life is so simple, it's also a good option to buy it directly from a life insurance company, rather than through an independent agent or intermediary.

Many resources for direct term life insurance are available online to help you make the right choice.

Pros and Cons of Direct Term Life Insurance

Pros of Direct Term Life Insurance

It is a good option for people who don't have a lot of time to buy insurance. It allows them to get financial security and peace of mind without having to deal with the many obstacles that come with it. Some of the benefits include:

It’s convenient: Even if it's 11 at night and you have a few minutes to spare, direct term life insurance is there for you to sign up for. Online shopping means that you can get it when and where you want, from the safety and comfort of your own home.

It’s quick: If you want to get direct term life insurance, there is no need to schedule a meeting with an insurance agent in person. You can buy insurance on the same day online or over the phone.

Even better, your plan will start right away. They might let you put off a medical exam for as long as six months or even not require it at all in some cases.

You have more control: In the case of direct term life insurance, you have more control because there's no hard sell from an insurance salesperson.

Cons of Direct Term Life Insurance

Even though there are many benefits to direct term life insurance, there are also disadvantages. Some of these include:

Hard to qualify with health issues: Despite the fact that some insurers don't require medical exams for some applicants, most life insurance providers need to see a medical report before they can sell you a policy.

This means people who are getting older and have health problems may have a hard time getting a direct term life policy at the level of coverage they want.

You might be unfairly rejected: Because you don’t deal with a real person when you apply online or follow prompts on your phone, you might be turned down for coverage.

Can’t negotiate terms: Because you don’t sign up for coverage with an agent or broker, there is very little room to negotiate a direct term life insurance policy’s terms.

People reviewing the pros and cons of Direct Term Life Insurance.

Source: Unsplash

Whole Life vs. Direct Term Life Insurance 

Direct term life insurance covers you for a set amount of time. It's different from whole life insurance, which lasts for your entire life and has a cash value component. You can buy both term and whole life insurance policies directly.

People choose term life because it is cheaper and more flexible than whole life. However, if you want to leave a legacy or give your family a certain amount of money when you die, whole life insurance might be right for you.

To determine the best fit for you, look at the table below:

Direct Term LifeWhole Life
LengthYou choose a term length based on your needs. Usually 10, 15, 20, or 30 years.Your coverage lasts your lifetime, as long as you pay your premium.
PremiumsTerm life premiums are usually the most affordable, and they stay the same for the duration of your term.Whole life premiums are more expensive than term premiums for the same coverage.
Medical examA medical exam is not always required.A medical exam is usually required.
Cash valueTerm life policies do not build a cash value. However, you can invest your savings on affordable premiums to grow assets.Cash value grows over time and is tax-deferred; you can use it to pay for anything you need.
Guaranteed payoutA payout is guaranteed for the duration of your term as long as premiums are paid.A payout is guaranteed for the life of your policy as long as premiums are paid.

A person searching if Direct Term Life Insurance or Whole Life Insurance is best for him.

Source: Pexels

Is Direct Term Life Insurance Right for You?

It is simple to get because you don't have to meet with an insurance agent to buy direct life insurance.

With direct term life insurance, you can also get life insurance quotes right away. When you buy it, you can get real-time updates about your policy sent to you instead of having to wait for information from a broker or salesman. 

Insurance Agent vs. Broker

An insurance agent represents one or more insurance companies. They act as an extension of the insurer. Agents serve as representatives of insurance companies and may be captive or independent.

An insurance broker represents the insurance buyer.

However, keep in mind that you'll be losing out on the experience and knowledge about insurance that you can only get from a broker or agent. Some of the benefits of using an insurance broker include:

  • Saving on your insurance rates: A broker works with several insurance partners in order to find the best deal on insurance coverage that's right for you.

  • Getting advice from an experienced professional: It is your insurance broker’s job to provide you with personalized support so that they can advise you on the coverage options that are best suited to your particular needs.

  • Receiving faster claims payouts: In the event of a claim or a loss, your broker will help you through the process.

  • Protecting yourself from dishonest conduct: All insurance brokers in the U.S. are licensed by registered insurance broker organizations.

Going directly with an insurance company can be a great option. If you want any of the following things, it might be the right choice for you:

  • Avoid dealing with insurance agents.

  • Have the ability to apply for insurance at your own pace.

  • Receive immediate updates on your policy’s status.

  • Get an account to make policy changes or print forms.

Where Can I Learn More about Life Insurance Options?

With direct term life insurance, you can choose the coverage you want when it’s convenient for you, and you can go directly to the source to get it.

Choosing a direct term insurance policy in 2022 is super simple and easy and it will help keep your family protected with minimal effort.

If you’re still unsure about direct term life insurance or other types of term life insurance, head to PolicyScout’s life insurance hub.

Our professionals are available to help you understand costs, enrollment options, different plans, and coverage for the many different types of life insurance.

Send your questions to Help@PolicyScout.com or call us at 1-888-912-2132 to get personalized assistance with finding a plan.