What Is Term Life Insurance?
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Imagine a world without yourself in it. Would your family need help paying the bills? Term life insurance can help you bridge that gap at a relatively low cost. If you die while the policy is in force, you’ll leave behind a lump sum of cash for whomever you choose.
Find out how term life insurance works, and when someone should buy term life insurance coverage.
Term life insurance definition
Term life insurance offers temporary coverage for a specific period of time, such as 10, 20 or 30 years. The length of your term life policy should match your longest financial obligation, such as your mortgage. As long as you keep up with your premium payments, your insurer will pay a sum of money to your life insurance beneficiaries if you die during the term.
Unlike whole life and other types of permanent life insurance that may last your entire life, term life insurance coverage typically expires when the term ends. This means that if you outlive your policy, your beneficiaries won't receive any money. If you still need life insurance, you may be able to renew your policy, convert it to permanent coverage at a higher premium or buy another policy.
Term life doesn’t build cash value that you can borrow against, like permanent life insurance does. This is one reason term life is cheaper than whole life. Term life purely provides insurance, and with whole life, you're paying for longer coverage and the ability to grow the policy's cash value.
Cheap, predictable premiums.
Easy to apply for online.
Lasts for the years you need coverage the most.
Typically can't make changes once policy is in force.
Beneficiaries don't get any money if you outlive the policy.
Do you need term life insurance?
Term life insurance is a good choice for most people as it typically covers you for the time of your life where you have the most financial obligations. Consider this type of coverage if:
People — like a spouse or child — depend on you financially.
Your death would be a financial burden to others.
You have debt that will be paid off after a number of years, such as a mortgage.
You’re a stay-at-home parent and your family would have to pay someone to handle household tasks and other services if you die.
» MORE: Who needs life insurance?
How long does term life insurance last?
Term life insurance policies often last for 10, 20 or 30 years, but some insurers offer policies in one- and five-year increments. If you’re a breadwinner in your family, aim to choose a term length that matches the years your family will rely on your income.
Ideally, by the time your coverage ends, you’ll no longer need life insurance. Your children will be grown, your mortgage will be paid off, and you’ll have enough savings to be financially secure.
If you expect your needs will change over time, you can buy more than one life insurance policy, giving you extra coverage during the stages of life when you need it most. This strategy is known as “laddering,” and it’s useful if you have financial obligations set to end at different times. For example, you could take out a 30-year policy to match your 30-year mortgage and a 20-year policy to cover your children until early adulthood, when they’re likely to start earning their own money.
How much does term life insurance cost?
The average cost of a 20-year, $500,000 term life insurance policy is $26 a month, according to Covr Financial Technologies, a life insurance brokerage.
Term policies are the most straightforward and affordable type of life insurance. The premiums stay the same for the life of the term, so you know exactly how much you'll pay for your coverage over time. The cost of a term life insurance policy depends on several factors, including your age, health and gender.
» MORE: Average life insurance rates
Average annual term life insurance rates for nonsmokers
Here’s a look at how much you might pay for a $500,000, 20-year term life insurance policy as a healthy, nonsmoking applicant.
Age | Average annual rates for men | Average annual rates for women |
|---|---|---|
20 | $216 | $177 |
30 | $221 | $187 |
40 | $334 | $282 |
50 | $819 | $642 |
60 | $2,357 | $1,656 |
70 | $9,436 | $7,994 |
Source: Covr Financial Technologies. Lowest three rates for each age averaged. Data valid as of January 30, 2025. | ||
Average annual term life insurance rates for smokers
Smokers tend to pay more for coverage. Below are sample rates for a 20-year, $500,000 term life insurance policy for otherwise healthy applicants.
Age | Average annual rates for men | Average annual rates for women |
|---|---|---|
20 | $758 | $577 |
30 | $800 | $645 |
40 | $1,491 | $1,185 |
50 | $3,495 | $2,560 |
60 | $8,658 | $6,020 |
70 | $32,708 | $27,580 |
Source: Covr Financial Technologies. Lowest three rates for each age averaged. Data valid as of January 30, 2025. | ||
Term vs. permanent life insurance
Term life insurance offers temporary coverage, while permanent policies — like whole life insurance — typically last your entire life. They also have a cash value component that grows over time at a fixed or variable rate.
Most term policies have a conversion feature, which means you can convert your term life policy to permanent insurance later on. Your premiums will go up, but you can stay insured without having to prove you’re still in good health. Some policies allow conversion at any time, while others permit it only in the first few years of coverage or before you reach a certain age, like 65 or 75.
Find out whether term life insurance is the best fit for you by using our tool below.
Term life insurance shopping guide
If you've settled on term life insurance, follow these steps to get the policy that best fits your needs.
1. Know the types of term life policies
Most term policies are level term life insurance — your death benefit remains steady for the life of the policy, and premiums typically stay the same as well. Your beneficiaries receive a sum of money if you die while the policy is active. According to the Insurance Information Institute, 20-year policies are the most popular choice.
There are other term life options on the market:
Annual renewable term life insurance. This type of policy covers you for one year, with the option to renew after the year is up. Premiums typically increase after each renewal, making annual renewable term life advisable only if you have a short-term need for coverage.
Convertible term life insurance. A convertible term life insurance policy allows you to upgrade a term life policy. This gives you flexibility to take advantage of lower premiums for term life insurance with the option to convert the policy to permanent life insurance later on without taking a new medical exam.
Decreasing term life policies have a life insurance death benefit that goes down over time, though premiums usually stay the same. One example is mortgage protection insurance. People may choose this type of policy to cover a specific debt that they plan to pay off during the term.
Group term life insurance. Many employers offer free or subsidized group life insurance policies that last as long as an employee stays with the company. The death benefit is often equal to one or two years of an employee’s salary.
Return-of-premium term life insurance. A return-of-premium life insurance policy refunds all or part of the premiums you paid if you outlive your term. It’s usually more expensive than a regular term policy.
2. Consider policy riders
Some companies offer extra features called life insurance riders, often for an additional fee. These common riders can enhance your coverage:
Accelerated death benefit rider. Allows you to access part of your policy's payout if you're diagnosed with a terminal illness. Some insurers will allow you to tap into the death benefit with a critical or chronic illness diagnosis.
Accidental death benefit rider. Pays out an additional sum to your beneficiaries if you die in an accident.
Waiver of premium rider. Pauses your premiums if you become unemployed or disabled and can’t work for a specified period of time, typically six months or longer.
Return of premium rider.
3. Understand the approval process
Before you buy coverage, insurers typically want to know how healthy you are. You may need to answer some health questions, and it’s important to be truthful. Companies can reject a life insurance claim if the application was inaccurate or incomplete.
The approval process varies based on the type of policy you're applying for:
Fully underwritten life insurance typically requires a medical exam. A medical professional may take blood and urine samples and check factors like your weight, height and blood pressure. Even if you have some health issues, you can generally find the lowest price by applying for a fully underwritten life insurance policy.
Simplified issue life insurance doesn’t require a medical exam. You’ll still answer health questions, and the insurer may pull data about you from other sources, such as your prescription drug history and driving record.
Guaranteed issue life insurance skips both the questionnaire and exam and doesn’t require any information about your health.
For some people, accelerated underwriting is another way to get life insurance without a medical exam. You answer health questions online or by phone, and the insurer uses outside data and sophisticated algorithms to evaluate your application. You might get rapid approval, with rates similar to those you’d get if you’d taken an exam. However, if you’re in less-than-perfect health, some companies that offer instant life insurance may require a medical exam before deciding whether to approve your application.
If you have a hobby or occupation that’s considered dangerous, like scuba diving or aviation, you can expect to pay higher rates. Some insurance companies may also deny you coverage or exclude deaths resulting from a dangerous activity from being covered. Find out whether your hobby is covered and how much it will cost you before you commit to a plan. If the premiums seem unreasonable, keep shopping around.
4. Compare prices
Every insurer has its own criteria for setting rates, so premiums can vary — sometimes significantly. It's worth getting quotes from a handful of insurers to make sure you're locking in the lowest possible rate.
It’s easy to compare life insurance quotes online for term policies. Be sure to choose the same coverage amounts and options for each policy you compare.
» MORE: Cheap life insurance companies
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