Term Life Insurance

Life insurance that pays a death benefit only if the insured dies within a fixed term, commonly 10, 20, or 30 years.

Overview

Coverage is pure protection with no savings component, which keeps premiums far below permanent insurance for the same face amount. A healthy 35 year old can often buy a 20 year, 500,000 dollar policy for a modest monthly outlay. Level term keeps premium and benefit fixed while annual renewable term reprices upward each year. Most policies are convertible, allowing a switch to permanent coverage without new medical underwriting before a deadline. If the insured outlives the term the policy simply ends unless renewed at much higher rates. Return of premium riders refund payments if the insured survives, but cost substantially more. Buyers commonly match the term to the years of income replacement or a mortgage payoff schedule.