Term life insurance provides a death benefit for a defined period, such as 10, 20 or 30 years, as long as required premiums are paid and the policy remains in force.
Term life insurance provides a death benefit for a defined period, such as 10, 20 or 30 years, as long as required premiums are paid and the policy remains in force. It generally does not build cash value, which is one reason its initial premium can be lower than permanent coverage.
Common level-premium periods include 10, 15, 20, 25 and 30 years, although availability varies by carrier and age. The term should roughly match the time horizon of the financial need: children becoming independent, a mortgage payoff date, working years remaining, or a business obligation.
Term life pricing depends on the insurer, age, health, tobacco or nicotine use, coverage amount, term length, underwriting class, occupation, avocations and state. Longer terms and larger death benefits generally cost more. An agent can compare available carriers, but the carrier's underwriting ultimately determines the premium.
Term coverage is often considered by families that need a larger death benefit during a temporary period. Common examples include income replacement, raising children, paying a mortgage, funding education, covering business debt or protecting a spouse until retirement assets are sufficient.
The policy may terminate, renew at a higher premium, or offer a conversion option, depending on the contract. The NAIC advises consumers to ask what renewal premiums will be and whether the right to renew ends at a certain age. Review these provisions before buying and again several years before the level term expires.
A conversion provision may allow some or all of a term policy to be converted to eligible permanent coverage without new medical underwriting, subject to the carrier's rules, deadlines and available products. Conversion can be valuable if health changes during the term, but converted permanent coverage usually has a higher premium.
Return-of-premium term insurance can return specified premiums if the insured survives the policy term and contractual conditions are met. It generally costs more than ordinary level term coverage. Compare the extra premium, contract restrictions and alternative uses of that money before deciding.
Term life is temporary coverage and usually has a lower initial premium for the same death benefit. Whole life is designed to be permanent and builds guaranteed cash value according to the contract. The better fit depends on whether the financial need is temporary or lifelong and how much premium can be sustained.
Term life focuses on death-benefit protection for a set period and generally has no cash value. IUL is permanent life insurance with cash value and index-linked crediting formulas. IUL also has policy charges, funding requirements and non-guaranteed assumptions that require more monitoring.
Yes. Many families use an ordinary term policy with a term and death benefit selected around the mortgage and family-income need. Unlike some mortgage-specific coverage, an individually owned term policy generally pays the beneficiary rather than the lender, allowing the family to decide how to use the proceeds.
Read our mortgage protection guide. To think through your own amount, start a Coverage Check or see our full life insurance guide.
Reviewed by James Woodley, licensed insurance advisor · Last reviewed
