What is term life insurance?

How term life works

You choose a coverage amount and a term length, apply for coverage, and pay premiums to keep the policy active. Common level-term periods include 10, 20, and 30 years. Eligibility and the price you pay depend on the insurer and its underwriting process.

With a level-term policy, the premium and death benefit generally stay the same for the stated term. Other term policies may have changing premiums or a decreasing benefit, so check the specific contract.

When term life may make sense

Term life is often considered when a household would need help replacing income or meeting a financial obligation if someone died. The useful question is how long that need is likely to last.

• Supporting children until they become financially independent.
• Helping a partner meet mortgage payments or other debts.
• Replacing income during your working years.

Benefits and trade-offs

Term insurance generally costs less than permanent insurance for the same initial death benefit, especially in the early years. It is focused on protection rather than accumulating cash value.

The trade-off is that the coverage is temporary. If you outlive an ordinary term policy, it does not pay a death benefit or return your premiums. Return-of-premium features are exceptions with their own costs and conditions.

What happens when the term ends?

Coverage ends unless the policy allows renewal or another continuation option and you meet its requirements. Renewal can be substantially more expensive. Some policies allow conversion to permanent coverage within specified deadlines; that does not mean the new premium stays the same.

Before buying, ask when renewal or conversion rights expire, what future premiums could be, and whether your chosen term matches your expected need.