Term Life Insurance

Term life insurance is a inexpensive way to provide money for your family if you die. Imagine a world without yourself in it. Would your family need help paying the bills? Term life insurance can help you bridge that gap at a relatively low cost. If you die while the policy is in force, you’ll leave behind a lump sum of cash for whomever you choose. Find out how term life insurance works, and when someone should buy term life insurance coverage.

What Is Term Life Insurance?

Term life insurance provides coverage for a set period—commonly 10, 20, or 30 years. It’s designed to last through the years when your financial responsibilities are highest, like when you’re paying off a mortgage or raising children. If you die during the coverage period and have kept up with your payments, your insurer will issue a death benefit to your chosen beneficiaries.

Unlike permanent life insurance, which can last your entire life and includes a cash value component, term life insurance is straightforward and expires once the term ends. If you're still alive when the policy ends, there’s no payout. At that point, you may choose to renew, convert it to a permanent policy, or purchase a new one—often at a higher cost.

Because term life insurance doesn’t build cash value, it tends to be much more affordable than whole life insurance. It’s pure protection without the investment component.

Key Benefits and Drawbacks

Advantages:

• Lower cost compared to permanent policies.

• Fixed premiums for the duration of the term.

• Simple application process, often available online.

• Covers you during the years you’re most financially vulnerable.

Disadvantages:

• No payout if you outlive the policy.

• Limited flexibility once the policy is active.

Who Should Consider Term Life Insurance?

Term life insurance suits most people who have dependents or outstanding financial obligations. It might be right for you if:

• You have family members who rely on your income.

• Your death would leave others with financial hardship.

• You’re repaying long-term debts like a mortgage.

• You're a stay-at-home parent whose contributions would be costly to replace.

How Long Should Your Term Be?

Policies typically last 10, 20, or 30 years. Choose a duration that aligns with your longest financial commitment—such as the time remaining on your mortgage or the years until your kids are financially independent. By the time the term ends, ideally, you’ll have fewer financial liabilities, and life insurance may no longer be necessary.

What Does Term Life Insurance Cost?

Term life insurance is typically the most affordable type of coverage. A healthy person might pay around $26 per month for a 20-year, $500,000 policy. Premiums are fixed throughout the term but vary based on your age, health, and gender.

Sample Annual Rates for Nonsmokers (20-Year, $500,000 Policy):

Age	Men	Women
20	$216	$177
30	$221	$187
40	$334	$282
50	$819	$642
60	$2,351	$1,651
70	$9,436	$7,994

Term Life vs. Permanent Life Insurance

Term life insurance provides coverage for a specific period and has no savings feature. Permanent life insurance, such as whole life, stays in effect for your entire life and builds cash value over time.

Many term policies come with a conversion option, allowing you to switch to permanent coverage before the term ends—without undergoing a new medical exam. This can be useful if your insurance needs change or if your health deteriorates.

Types of Term Life Insurance

• Level Term: Fixed premiums and a steady death benefit throughout the term.

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• Annual Renewable Term: Covers one year at a time, renewing annually. Premiums typically increase each year.

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• Convertible Term: Allows you to switch to permanent coverage later.

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• Decreasing Term: The death benefit decreases over time, often used to match a declining debt like a mortgage.

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• Group Term: Offered through employers, often at no cost, with limited coverage based on salary.

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• Return-of-Premium: Refunds your premiums if you outlive the term. Costs more than standard term policies.

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Optional Riders to Customize Your Policy

You can enhance your term policy with add-ons called “riders” for an extra fee:

• Accelerated Death Benefit: Access part of the benefit early if diagnosed with a terminal illness.

• Accidental Death Benefit: Pays more if you die from an accident.

• Waiver of Premium: Waives premiums if you become disabled.

• Return of Premium: Refunds your premiums if you survive the term (often a separate policy option).

How the Application Process Works

Before issuing a policy, insurers assess your health and risk factors. You’ll need to answer questions honestly. Lying on your application can lead to a denied claim.

Types of Application Processes:

• Fully Underwritten: Requires a medical exam and offers the lowest rates.

• Simplified Issue: No exam, but includes a health questionnaire and background checks.

• Guaranteed Issue: No health questions or exam; available to almost anyone but at a higher cost.

• Accelerated Underwriting: Uses tech and data sources for faster approval, often without an exam.

Bottom Line:Term life insurance is a practical, cost-effective way to protect your family’s financial future during the years you need it most. By understanding your needs and the options available, you can choose a policy that gives you peace of mind without breaking the bank.