Term Life Insurance

Less expensive than whole life insurance, term life insurance offers you a way to provide for your loved ones in case you die before you are able to save enough to provide financial security without additional insurance.

What is term life insurance?

Term life insurance is a type of life insurance policy that provides a death benefit if you die within a certain period of time (known as the “term” of the policy). You only pay premiums during this term, and the term of the insurance policy can last anywhere from 1 to 30 years.

As long as you pay your premiums on time, you will receive the death benefits if you die within the term of the policy. If you die after the term of the policy expires, you receive no death benefit.

This is the simplest and one of the most affordable types of life insurance. Unlike other forms of life insurance, such as whole life insurance, you get no additional benefits besides the death benefit (e.g. Cash value).

The specific features and benefits you receive depend upon the specific policy you purchase. However, most whole life insurance policies include the following features:

Low Premiums

This form of life insurance tends to be less expensive because of the limited-term and the simplicity of the policy.

Limited-Term

The policy is only effective for the amount of time you select. You can choose between 1 and 30 years, but most policies last between 10 and 30 years.

Guaranteed Death Benefit

Your death benefit is guaranteed from the start of the policy and will be paid out if you die within the term of the policy.

Required Exam

Most term life insurance policies will require you to go through an application process that includes a medical exam to establish your rate class and eligibility for coverage.

Convertibility

Many term life insurance policies are convertible, which means that you can convert them into a whole life insurance policy within a certain period of time (e.g. Within the first 5 years of the policy) without taking another medical exam. This feature can save you money on a medical exam, make it easier to get a whole life insurance policy if you develop serious health issues, and provide flexibility.

What are the downsides to term life insurance?

Before purchasing term life insurance, take these features into consideration:

Limited-Term

If you want a life insurance policy to cover you just until your children are grown, their college is paid for, and you have had a chance to save a financial safety net, term life insurance might be right for you.

If, however, you need a life insurance policy that will cover you for your entire life, you might want to seek out a form of whole life insurance.

Longer Application Process

Because coverage is not guaranteed, and because you have to go through a medical evaluation, the process of applying to and obtaining this type of policy can take 4-8 weeks.

If you can wait, this process may not be a hindrance, but if you need life insurance right away or if you have medical issues that may affect your eligibility, you may need to look for a different type of life insurance, such as no-exam insurance.

Increasing Premiums

Your premiums will increase each year because your risk of death increases as you age.

No Cash Value

Term life insurance does not build any cash value that you can withdraw or borrow against.

Why consider term life insurance?

Term life insurance is a good option for individuals who want coverage for a certain period of time while they build up financial reserves to provide financial stability into retirement. Its low premiums and simplicity make it easy to understand and to afford for many individuals and families and allows you to get a higher death benefit for less money. As a result, it can serve as a way to replace lost income and provide financial stability for your loved ones if you were to die before saving enough for retirement and future medical expenses.