Term life insurance is a type of life insurance that provides coverage for a defined period — typically 10, 15, 20, or 30 years. If the insured person passes away during the term, the insurer pays the death benefit to the named beneficiaries. If the insured survives the term, the coverage ends with no payout and no accumulated value.
Key characteristics
- Fixed coverage period: Coverage applies only during the selected term
- Level premiums: Most term policies have premiums that stay the same throughout the term
- No cash value: Term life does not accumulate savings
- Higher death benefit per dollar: Because it lacks the savings component of permanent insurance, term life typically offers more coverage per premium dollar
Common term lengths
| Term Length | Common Use Case |
|---|---|
| 10 years | Short-term obligations or older applicants |
| 15 years | Specific debt coverage (e.g., a 15-year mortgage) |
| 20 years | Parents with young children, homeowners |
| 30 years | Long-term income replacement, young families |
What happens at the end of the term?
When the term expires, coverage ends. Options typically include:
- Letting it lapse: If your financial obligations have ended, this may be fine
- Renewing: Most policies offer a renewal option, but premiums will be much higher at your current age
- Converting: Many term policies include a conversion option, allowing you to convert to a permanent policy without a new medical exam, within a specified window
Who term life tends to make sense for
- Parents with children who are financially dependent
- Homeowners with a mortgage to protect
- Individuals who want meaningful coverage at lower cost
- People who want coverage aligned to a specific period of financial vulnerability
Policy terms and provisions vary by insurer and policy type. This is educational information only.