0110 year
Short horizon, specific obligation
Often used to cover a business loan, the last stretch of a mortgage, or the years until a pension or retirement savings takes over.
Term life
Coverage for the years someone depends on you.
Term life buys a fixed amount of protection for a fixed number of years at a fixed premium. It is the most straightforward form of life insurance, and the least expensive per dollar of coverage.
How it works
Six things that define a term policy.
Level term is the version most people buy: same coverage, same premium, for a set number of years.
- A level term policy keeps the same death benefit and the same premium for the whole term you choose.
- If you die during the term while the policy is in force, the insurer pays the death benefit to your beneficiaries.
- If you are alive when the term ends, coverage stops and there is no payout. A standard term policy has no cash value and returns nothing at the end.
- That is exactly why term costs less per dollar of coverage than permanent insurance: the insurer is only on the risk for a defined stretch of years.
- Many term policies can be renewed annually after the level period, but at a much higher premium that typically increases each year.
- Many term policies include a conversion option that lets you convert some or all of the coverage to a permanent policy without new medical underwriting, up to a deadline set in the contract.
Term lengths
Pick the length by the obligation, not by the price.
0220 year
The most common choice
Long enough to raise a child from young to independent, or to carry most of a mortgage. It is the default many families land on for good reason.
0330 year
Coverage through the long obligations
Useful when you have young children and a new mortgage at the same time. It costs more than a shorter term because the insurer is covering more years.
04Laddering
More than one policy on purpose
Some people stack a shorter, larger policy on top of a longer, smaller one so coverage steps down as debts shrink and children grow up, rather than dropping all at once.
Sizing the policy
Six steps to a number you can defend.
Guessing at a coverage amount is how people end up either underinsured or paying for protection they do not need. Working through these steps takes fifteen minutes and gives you a figure you can explain.
- Count the years, not the dollars, first. Pick the term by asking how long someone would still depend on your income.
- Add up what the money would need to cover: income replacement, the mortgage balance, other debts, childcare, and expected education costs.
- Subtract savings and any coverage you already have, including a group policy through work, while remembering group coverage usually ends with the job.
- Consider whether a stay-at-home parent also needs coverage, since replacing that unpaid work has a real cost.
- Check whether the policy includes a conversion option and how long that option lasts, because your health may change before the term does.
- Look at riders the insurer offers, such as a waiver of premium for disability or a child rider, and price them rather than assuming they are included.
At a glance
Term life in four points.
- years, the common level term lengths
- 10 to 30
- premium and death benefit for the whole term
- Level
- in a standard term policy
- No cash value
- option on many policies, usually with a deadline
- Conversion
Good to know
Questions people ask about term life.
What happens when my term ends?
Coverage stops. Most policies allow renewal on a yearly basis after the level term, but the premium is recalculated at your current age and usually rises sharply each year, so renewal is generally a bridge rather than a plan. If you still need coverage, applying for a new policy or using a conversion option is normally the better route.
Can I convert a term policy to permanent coverage?
Many term policies include that option, and it is one of the more valuable features to check for. Conversion typically does not require new medical underwriting, which matters if your health has changed. The option usually expires at a set age or after a set number of years, and only certain permanent products may be available to convert into.
Do I get money back at the end?
Not with a standard term policy. There is a variation called return of premium term that refunds premiums if you outlive the term, but it costs substantially more each month for the same death benefit. Compare that extra cost against buying regular term and directing the difference somewhere else.
Can I cancel a term policy?
Yes. Life insurance is not a contract that traps you. If you stop paying, the policy lapses after a grace period and coverage ends. There is generally no surrender value to receive with term, so cancelling simply ends the coverage.
Will my premium go up during the term?
Not with level term, which is what most people buy. The premium and the death benefit are fixed for the length of the level period. Other structures exist, including annually renewable term and decreasing term, where either the premium rises or the coverage amount falls over time, so check which structure a quote is describing.
Term life
See what term coverage would cost for you.
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