Term Life Facts

Get the facts about term life here. We'll explain what it is, how it works, and what its benefits are.

Term Life Basics

Term life insurance provides protection for a limited time period, or term. Term life is usually regarded as the simplest, most straightforward type of life insurance. Term policies are intended to offer life insurance protection for those on limited budgets. When you get a term life insurance quote, you will see that you can purchase a fairly large amount of insurance protection for relatively small premiums. This makes term life ideal for short-term goals, such as extra life insurance protection while you pay off a loan or raise young children. You can usually get quotes on term life insurance policies with terms of 5, 10, 20, or 30 years. After the term expires, you can renew the policy for a higher premium.

Features of Term Life

Below is a summary of the main features of a term life insurance policy:

• Very affordable in the short run.
• Fluctuating premiums. Most insurers reserve the right to raise or lower your premiums at any point in the policy. Your premiums might change due to projected changes in investment earnings, expenses, or mortality experience. The insurance company can never raise your premiums above the maximum specified in your policy, though.
• Renewable. Most term life policies allow you to renew coverage once the original term of the policy expires. If you decide to get a term life insurance quote, keep in mind that, each time your policy is renewed, your premiums will increase to correspond with your advanced age at the time of renewal. In other words, term life becomes less and less affordable as you get older.
• Convertibility. If you get a term life insurance quote on a policy with a conversion option, this means that you will be able to exchange the policy for permanent life insurance coverage at any time. Most insurers give you this option until you reach a certain age (e.g., 75).

How Term Life Works

When you get a term life insurance quote, you will be getting an estimate of the premium you will pay for temporary life insurance coverage. If you die while the policy is in force, your beneficiaries will receive the proceeds of the policy. If you are still alive when the policy expires, your coverage will cease unless you choose to renew it at higher premiums. This means that, unless you renew, you will no longer have life insurance protection once your term is over. Remember when you are getting quotes on term life insurance that this kind of policy does not have any cash value, so the policy is only worth something if you die while it is in effect.