Term Life Insurance
Term Life Insurance
Key Takeaways
- Term life insurance offers temporary and budget-friendly coverage that lasts for a set number of years.
- Premiums remain level throughout the term.
- Policies do not build cash value, which helps keep costs lower than permanent insurance.
- Coverage ends when the term expires unless renewed or converted.
- A term policy can help protect income, pay off major debts, and support long-term obligations.
What Is Term Life Insurance?
Term life insurance is a type of life insurance that provides protection for a defined period of time. If you pass away while the policy is active, your beneficiaries receive a tax-free death benefit they can use for expenses such as income replacement, mortgage payments, education costs, or daily living needs.
Because it’s built for temporary needs, term life insurance is often the most cost-effective option for families, especially during high-responsibility years like raising children, paying off a home, or supporting dependents.
Advisor Insight
Most families choose a term length that matches the years their income is needed the most.
Choosing a longer term can help avoid future rate increases that come with new medical underwriting or changes in health. A conversion option can also provide long-term flexibility if permanent coverage is needed later.
Pros and Cons of Term Life Insurance
Pros
- Affordable monthly cost
- Straightforward and easy to understand
- Flexible term lengths
- Level premiums during the entire term
- High coverage amounts available
- Option to convert to permanent life insurance with many carriers
Cons
- Coverage ends when the term expires
- No cash value or savings feature
- Renewal premiums after the term ends are higher
- Not ideal for people who want lifelong coverage
This balanced view helps you understand where term life fits and where it may not be the best long-term solution.
How Term Life Insurance Works
Premiums
Premiums remain the same for the entire length of the term. Your rate is based on age, health history, lifestyle, and coverage amount when you apply.
Death Benefit
If you pass away during the term, your beneficiaries receive a tax-free benefit that can be used for any financial need.
When the Term Ends
Once the term expires, coverage stops unless you choose to renew or convert the policy.
Renewal
Most carriers allow annual renewal, but rates increase based on your new age.
Conversion
Many term policies include a conversion option that lets you switch to permanent life insurance without a medical exam. This is helpful if your health changes or if you want coverage for life.
Coverage Lengths and Policy Amounts
Common Term Lengths
- 10-Year Term
- 15-Year Term
- 20-Year Term
- 25-Year Term
- 30-Year Term
Shorter terms can work for short financial obligations. Longer terms protect your family for most of your working years and avoid the need to reapply later.
Choosing a Coverage Amount
A simple way many families estimate coverage is:
Annual income × 10
Other factors to consider:
- Mortgage balance or rent
- Future college or childcare costs
- Outstanding loans or debts
- How long dependents rely on your income
- Savings and existing coverage
Types of Term Life Insurance
Level Term Life Insurance
Most common option. Premiums and death benefit remain the same for the entire term.
Decreasing Term Life Insurance
Coverage decreases over time, often used to match a declining mortgage balance.
Return of Premium (ROP) Term
Costs more but refunds your paid premiums if you outlive the term.
Renewable Term
Allows you to extend coverage annually without new medical underwriting. Premiums increase each year based on age.
Convertible Term
Lets you convert some or all of your coverage to permanent life insurance without a medical exam.
Average Term Life Insurance Rates
| Age | 10-Year Term (Female/Male) | 20-Year Term (Female/Male) | 30-Year Term (Female/Male) |
|---|---|---|---|
| 30 | 29 / 36 | 42 / 51 | 72 / 86 |
| 40 | 46 / 56 | 68 / 87 | 110 / 140 |
| 50 | 100 / 125 | 155 / 218 | 247 / 377 |
| 60 | 214 / 296 | 394 / 594 | Not available |
| 70 | 582 / 969 | 1,156 / 1,436 | Not available |
Rates shown above assume average health and are monthly premiums. Numbers rounded to nearest whole dollar. Again, these are broad estimates for educational understanding only. Actual pricing depends on individual underwriting results.
Riders and Optional Features
Riders allow you to customize your policy based on your needs. Common options include:
- Accelerated Death Benefit Rider – Access part of the death benefit if diagnosed with a qualifying terminal illness.
- Child Rider – Provides coverage for eligible children.
- Waiver of Premium Rider – Waives premiums if you become disabled and cannot work (carrier rules apply).
- Accidental Death Benefit Rider – Provides an additional benefit if death results from a covered accident.
Availability varies by carrier and state. Adding riders typically increases the premium.
Cost of Term Life Insurance
Term life is typically one of the most affordable insurance options. Your premium is determined by:
- Age
- Health history
- Build and lifestyle
- Tobacco use
- Coverage amount
- Term length
- Gender
- Prescription history
- Family health history (varies by carrier)
Younger and healthier applicants generally pay lower premiums. Higher coverage amounts and longer terms cost more.
How to Get More Affordable Term Life
- Consider a shorter term if it still meets your needs
- Select a coverage amount that aligns with your financial responsibilities.
- Apply while you’re younger and in good health.
- Maintain healthy habits to avoid tobacco-rate premiums.
Term Life vs Other Policy Types
A. Term Life vs Whole Life
| Feature | Term Life | Whole Life |
|---|---|---|
| Coverage Duration | 10–30 years | Lifetime (as long as premiums are paid) |
| Premiums | Lower, level during term | Higher, level for life |
| Cash Value | No | Yes |
| Flexibility | Temporary needs | Long-term planning |
| Best For | Income replacement, debts, temporary expenses | Estate planning, lifelong coverage |
B. Term Life vs Universal Life / IUL
| Feature | Term Life | Universal Life / IUL |
|---|---|---|
| Coverage Duration | Specific term | Lifelong (if funded properly) |
| Premiums | Lower | Flexible, but generally higher |
| Cash Value | None | Yes, grows based on interest or index performance |
| Complexity | Simple | More complex |
| Best For | Budget-conscious protection | Long-term planning and cash value accumulation |
C. Term Life vs Employer Group Life
| Feature | Term Life | Group Life |
|---|---|---|
| Portability | Stays with you | Often lost when changing jobs |
| Coverage Amount | You choose | Usually 1–2× salary |
| Cost | Based on individual risk | Low or free through employer |
| Medical Requirements | Varies | None |
| Best For | Long-term planning | Supplemental, not primary coverage |
Is Term Life Insurance Worth It
Term life is often worth considering if you want affordable coverage that protects your income during the years your family needs financial support the most. It is designed for temporary needs rather than lifelong planning. If you want lifelong coverage or the ability to build cash value, a permanent policy may be a better fit.
For many families, term life provides strong protection at a cost that fits most budgets. It is especially helpful for parents, homeowners, and anyone who wants to create financial security for their loved ones.
Who Term Life Insurance Is Best For
Term life often fits well for:
- Families raising children
- Homeowners with a mortgage
- Primary income earners
- People with long-term financial obligations
- Anyone needing affordable protection
- Individuals who want straightforward coverage without complex features
Self-Service or Advisor Support
You can explore coverage options on your own time, review different term lengths, and compare policy amounts at your own pace. If you prefer guidance or have questions about choosing the right amount, a licensed advisor is available to help you understand your options.
No pressure. No commitments. Just clear information when you need it.
FAQs
Do I need a medical exam?
Do I need a medical exam?
What happens when the term ends?
Can I convert my term policy to permanent insurance?
How much coverage do I need?
What affects the cost of a term life policy?
Can I renew my coverage after the term ends?
Can I change my beneficiary?
Does term life insurance cover all types of death?
Can I have more than one life insurance policy?
What if I miss a payment?
Most policies include a grace period. If payment is not made within that period, coverage may lapse.
