Term life insurance is the simplest and usually most affordable kind of life insurance: protection for a set number of years.
How it works
You choose a coverage amount (the death benefit) and a term, commonly 10, 20 or 30 years. You pay a premium, often fixed for the whole term. If you pass away during the term, the insurance company pays the death benefit to your beneficiaries, generally income-tax-free. If you outlive the term, coverage ends and there’s no payout or refund, much like car insurance.
Many term policies let you renew at a higher price when the term ends, or convert to permanent coverage without a new medical exam within a certain window. Some offer riders, such as living benefits that may let you access part of the death benefit if you face a qualifying serious illness.
Who it may suit
- Young families who need a lot of protection on a tight budget
- Homeowners who want coverage that lasts as long as their mortgage
- Parents who want income replacement until children are grown
- Anyone whose need for life insurance is temporary
What to watch for
- No cash value: if you outlive the term, you don’t get your premiums back.
- Renewing after the term can be very expensive at older ages.
- Coverage through work usually isn’t enough and may not follow you if you leave your job.
The bottom line
Term life is a powerful, budget-friendly way to protect the people who depend on your income. It’s often the right first step.
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For educational purposes only. Coverage is subject to underwriting and approval. Features and riders vary by insurance company and state.