Term Life Insurance
What is Term Life Insurance?
Term life insurance provides coverage for a specific period (the "term"). If the insured dies during this term, beneficiaries receive a death benefit. If the insured outlives the term, coverage ends with no payout.
Key Characteristics:
- Temporary Coverage: Typically 10, 15, 20, 25, or 30 years
- Death Benefit Only: Pure protection with no savings/investment component
- Fixed Premiums: Premiums usually remain constant throughout the term
- Lower Cost: Generally more affordable than permanent life insurance
Common Term Lengths
- 10-year term
- 15-year term
- 20-year term (most popular)
- 25-year term
- 30-year term
Advantages
- Affordable premiums for high coverage amounts
- Simple and straightforward to understand
- Ideal for temporary financial obligations (mortgage, children's education)
- Often convertible to permanent insurance without medical exam
Disadvantages
- No cash value accumulation
- Coverage expires at end of term
- Premiums increase significantly if renewed at older ages
- No return on premiums if you outlive the term
Who Should Consider Term Life?
- Young families with dependents
- Homeowners with mortgage debt
- People with co-signed debts
- Business owners with key person needs
- Those needing coverage until retirement
Typical Premium Factors:
- Age and health of insured
- Coverage amount
- Term length
- Smoking status
- Occupation and hobbies
Note: Term life is often called "pure" insurance because it focuses solely on death benefit protection.