Term life insurance, explained.
Term life insurance provides a death benefit for a set number of years. Because your financial responsibilities peak at certain stages, it is one of the most straightforward ways to protect your family’s income.
Protection for the years that matter most.
With term life insurance, you choose a death benefit and a term, such as 10, 20 or 30 years. If the insured passes away during the term, the policy pays the death benefit to the beneficiaries. However, if the term ends while the insured is still living, the coverage ends.
Term policies do not build cash value, so the premium focuses on the cost of coverage. For that reason, term life generally costs less at the start than permanent insurance with the same death benefit. Many people use it to cover a period when others depend on their income, such as while raising children or paying a mortgage.
How it works, step by step.
Choose an amount and a term
Your agent helps you estimate how much coverage fits by looking at your income, debts, dependents and goals. Then you decide how long you need it.
Apply and underwrite
After you apply, the carrier reviews your age, health and other factors. Depending on the carrier and product, this review can include a medical exam, but some products simplify it.
Pay your premium
Premiums generally stay level for the length of the term, so you know what you will pay.
Protection in force
If the insured passes away during the term, the insurer pays the death benefit to the beneficiaries. In general, they receive it free of federal income tax.
Term life vocabulary.
Death benefit
The death benefit is the amount the policy pays your beneficiaries if the insured passes away while the policy is in force. Therefore, it is the core of what you are buying.
Term length
The term length is how many years the coverage lasts, commonly between 10 and 30 years depending on the carrier. As a result, you can match it to the years you need protection.
Level premium
A level premium stays the same during the term. Because of this, your cost is predictable.
Conversion option
A conversion option lets you switch to permanent coverage without new medical evidence, within a set window. However, availability varies by policy, so ask before you buy.
Who it’s for, and who it may not suit.
Often a good fit
- Protecting your family’s income while others depend on you is your priority.
- Covering a mortgage, a business loan or other debt for a set period matters to you.
- Raising children is part of your plan, so you want coverage until they are independent.
- The largest death benefit for the lowest initial premium appeals to you.
May not be the best fit
- Coverage that lasts your entire life is what you want, but term coverage ends.
- A policy that builds cash value you can access appeals to you, but term policies have none.
- Coverage may still be necessary when the term ends, so a longer term or a conversion option may be worth considering.
What carriers look at for term life.
Eligibility and pricing for term life depend on a few core factors, so it helps to know them before you apply.
Age
Younger applicants generally qualify for lower premiums. However, maximum issue ages and term lengths vary by carrier.
Health and family history
Carriers review your medical history, current conditions, height and weight. In many cases, they also consider your family’s health history.
Tobacco and lifestyle
Tobacco and nicotine use usually affect pricing. Additionally, some occupations and hobbies may influence the decision.
Coverage amount
Larger death benefits may require more underwriting, such as a medical exam or additional records.
Term life questions, answered.
What happens when the term ends?
The coverage ends when the term ends. However, depending on the policy, you may be able to renew at a higher premium or convert to permanent coverage. Because the options vary by carrier and policy, ask your agent early.
Can I convert my term policy to permanent insurance?
Many term policies include a conversion option that lets you switch to a permanent policy without new medical evidence during a stated period. Therefore, ask your agent which carriers offer it.
How much coverage do I need?
It depends on your income, debts, the number of people who depend on you and your goals. Your agent will go through these with you, so you can arrive at a reasonable amount.
Do I need a medical exam?
It depends on the carrier, your age and the amount of coverage. While some policies require an exam, others use health questions or electronic records instead.
Is term life cheaper than whole life?
Term generally costs less than whole life, because it covers a limited time and does not build cash value. As a result, its initial premium is lower for the same death benefit.
Term life insurance provides coverage for a specified period and does not build cash value. Coverage ends at the end of the term unless you renew or convert it, which may cost a higher premium. Products, terms and availability vary by carrier and state, and underwriting applies.
Whole Life Insurance
Permanent coverage with level premiums, while cash value grows at a guaranteed rate.
Learn moreWealth Building (IUL)
Permanent life insurance, so it lasts a lifetime, with an index-linked cash value component.
Learn moreFinal Expense Insurance
Smaller permanent policies that help cover end-of-life costs, so your family does not carry them alone.
Learn moreReady to protect your family’s income?
Speak with a licensed agent by phone, or request your free quote online. Your dedicated agent will then walk you through your options.