What Is Term Life Insurance?
Term life insurance is a straightforward form of life insurance that provides coverage for a set period of time. You pay a fixed premium, and if you pass away during the term, your beneficiaries receive the full death benefit, tax-free. If the term expires and you are still alive, the coverage ends (though many policies offer a renewal option at a higher rate).
How It Works
You choose a coverage amount (typically $100,000 to $2,000,000) and a term length (10, 15, 20, or 30 years). Your premium is locked in for the entire term based on your age, health, and coverage amount at the time of purchase. The younger and healthier you are when you buy, the lower your rate.
Who Is It For?
- Young families with children who depend on your income
- Homeowners with a mortgage to protect
- Anyone wanting to replace their income during working years
- People on a budget who need maximum coverage
- Business owners covering key-person or partnership risk
Pros & Cons
- Most affordable type of life insurance
- Simple and easy to understand
- Fixed premiums for the entire term
- Large coverage amounts available
- Many policies are convertible to permanent insurance
- Coverage expires at the end of the term
- No cash value or investment component
- Renewal after expiration is typically much more expensive
- May not be available to older applicants (75+)
What Affects the Cost?
- Age at time of purchase (younger = cheaper)
- Health status and medical history
- Tobacco/nicotine use (smokers pay 2-3x more)
- Coverage amount and term length
- Gender (women typically pay less)
- Occupation and hobbies (risky activities cost more)
Typical cost: $15-50/month for a healthy 30-year-old with $500K coverage
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