Term life insurance helps you provide basic, more affordable financial support for your loved ones when they may need it most. Term life insurance offers a simple way for you to help your family reach financial goals — from helping to pay off a mortgage or college tuition — if you’re not there to provide for them.
What is term life insurance?
Term life insurance is the simplest type of life insurance coverage. It pays a death benefit to your beneficiaries if you die during the term of your policy. You typically choose a length of time during which your policy premium won’t increase — such as 10, 20 or 30 years. After that level premium period, the cost of the policy increases with age until it expires at the end of the policy term.
How much does term life insurance cost?
The cost of term life insurance depends on several factors, including:
- How much insurance you choose
- How long you want your premiums to remain level
- Your age, your health and other risks in your life
Coverage could start for less than $15 per month for a healthy young adult who doesn’t smoke.
Who is term life insurance best suited for?
Term life insurance is often popular with people who want to help with financial obligations and goals that may have an end date, such as paying off a mortgage or for a child’s college education. Term life insurance can also be popular for people who want a large amount of coverage — for example, to help provide financial support to a spouse and young children potentially for the rest of their lives — but can’t afford that much permanent life insurance right now. Read more about different types of life insurance.
What happens when the term ends?
If you outlive the term of the life insurance policy, your policy ends. You no longer owe premiums, and you no longer have coverage.
But it’s important to understand just what the term of that policy really is. A “10-year” policy may be a policy with a term of 10 years — coverage ends after the tenth year. Or it may be a policy whose coverage lasts to age 90, with premiums that don’t increase during the first 10 years. After that tenth year, the policy doesn’t end, it just starts increasing in cost. Details like that are one reason it’s important to review policy provisions carefully, so you know what coverage you’re buying and how long it can last.
One advantage of converting from a term to a whole life policy: you won’t have to qualify for the new policy based on your health and other risk factors. Eligibility is guaranteed during the conversion period of your term policy. However, because the conversion period has an end, it’s a good idea to review your coverage with your agent every few years, so you can plan ahead.
If your term policy doesn’t have a conversion option, or the conversion period has expired, you will need to apply for a new policy if you want permanent insurance.
What are some of the differences between term and whole life insurance?
Term life insurance can provide more affordable coverage for a specific amount of time. But term insurance expires, unlike whole life insurance, which is a type of permanent life insurance that provides lifetime coverage1 and can accumulate cash value.
Term life insurance
Whole life insurance
Provides coverage at a
fixed cost for a specific
time frame — generally
10, 20 or 30 years. Then
cost increases with age.
Provides lifetime coverage as long as required premiums are paid.
Premiums remain level
for the initial level premium period.
The shorter the level
premium period, the less expensive
coverage can be. Premiums increase
after the level premium period.
Guarantees level premiums for the life of the policy.
Provides a death benefit but does not accumulate cash value.
Accumulates cash value over time as long as premiums are paid, and assets can be used during your lifetime2.
Can often be converted into a permanent policy.
Cannot be converted into another type of life insurance policy.
Learn From Experience
More questions about life insurance? Read on to hear the real-life stories of people, agents and experts.