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Term Life Insurance

Looking for a way to protect your loved ones financially in case something happens to you? Term life insurance may be the solution you’ve been seeking. This article will explore the ins and outs of term life insurance, helping you understand what it is and how it works.

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Term life insurance is a type of life insurance policy that provides coverage for a specified period, usually 10 to 30 years. Unlike permanent life insurance, which provides coverage for your entire life, term life insurance offers a more affordable option for individuals who want to ensure their loved ones are financially protected during a specific time frame.

One key benefit of term life insurance is its affordability. Premiums for term policies are generally lower than those of other types of life insurance, making it a popular choice for young families or individuals on a budget.

This article will delve into the pros and cons of term life insurance, discuss the factors to consider when purchasing a policy and provide tips on finding the best coverage for your needs. So, let’s get started and demystify the world of term life insurance.

What is Term Life Insurance?

term life insurance definition

Term life insurance is a type of life insurance policy that provides coverage for a specific term or period. It offers a death benefit to the beneficiaries if the insured person passes away during the policy’s term. The term can vary from 10 to 30 years, depending on the policy chosen.

Unlike permanent whole life insurance, which includes an investment component and builds cash value over time, term life insurance focuses on providing a death benefit. This means that if the insured person outlives the policy’s term, there is no payout at the end.

Term life insurance is a popular choice for individuals who want to ensure their loved ones are financially protected during a specific period. It is commonly used to cover temporary needs such as mortgage payments, education expenses, or income replacement in case of the insured person’s untimely death.

life insurance policy length

Unfortunately, insureds who outlive their terms then you will not get anything from the insurance term life provider. However, there is an option to apply for a return of premium policy for an additional cost. This limitation is the reason why term life is good as a safety net for unexpected life events. Also, it is why whole life and term life insurance are two of the most affordable options for life insurance.

Benefits of Term Life Insurance

Term life insurance offers several benefits, making it an attractive option for many individuals. Here are some of the key advantages:

  1. Affordability: Term life insurance is generally more affordable than permanent life insurance. The premiums for term policies are lower because they only provide coverage for a specific period, reducing the insurance company’s risk.
  2. Flexibility: Term life insurance allows you to choose the coverage period that best suits your needs. Whether you want coverage for 10, 20, or 30 years, you can select the term that best suits your situation.
  3. Simplicity: Term life insurance policies are straightforward to understand. They focus solely on providing a death benefit without any complex investment components, making it easier to compare policies and find the right coverage for your needs.
  4. Customizable coverage amount: With term life insurance, you can choose the coverage amount that meets your financial obligations and provides for your loved ones. This flexibility allows you to tailor the policy to your needs and budget.
  5. Financial protection during critical years: Term life insurance is particularly valuable when financial obligations are high, such as when you have a mortgage, young children, or significant debts. It ensures that your loved ones are protected financially if something happens to you during this period.

Understanding the Different Types of Term Life Insurance

When it comes to term life insurance, you can choose from different types of policies. Understanding these types will help you select the best suits your needs. Let’s explore the most common types of term life insurance:

  1. Level Term: Level term insurance is the most straightforward type of term life insurance. It provides a fixed death benefit and premium payment throughout the term of the policy. This means the coverage amount remains unchanged, and the premiums do not increase over time.
  2. Decreasing Term: Decreasing term insurance is designed to align with specific financial obligations that decrease over time. For example, it is commonly used to cover mortgage payments. The death benefit decreases over the policy term while the premiums remain level.
  3. Renewable Term: Renewable term insurance allows you to renew your policy at the end of the term without undergoing a medical examination. This is beneficial if you anticipate needing coverage for a longer period or if you want to maintain coverage while your health may have changed.
  4. Convertible Term: Convertible term insurance provides the option to convert your term policy into a permanent life insurance policy without undergoing additional medical underwriting. This can be advantageous if your needs change or you want to secure coverage for your entire life.

It is important to understand the nuances of each type of term life insurance and choose the one that aligns with your needs and future plans. When deciding which type of term policy to purchase, consider factors such as your financial obligations, budget, and desired coverage period.

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How to Determine the Coverage Amount for Term Life Insurance

Determining the appropriate coverage amount for your term life insurance policy is crucial in ensuring your loved ones are adequately protected. Here are some factors to consider when calculating the coverage amount:

  1. Financial obligations: Start by assessing your financial obligations, such as mortgage payments, outstanding debts, and education expenses. These should be covered by the death benefit to ensure that your loved ones can continue to meet these obligations if something happens to you.
  2. Income replacement: Consider the income replacement needs of your family. How much income would be required to maintain their current standard of living? Multiply the annual income by the number of years you want to provide income for to determine the coverage amount needed.
  3. Future expenses: Anticipate any future expenses, such as college tuition for your children or a wedding fund. Factoring in these expenses will help ensure that your term life insurance coverage is sufficient to meet future financial needs.
  4. Additional funds: It may be wise to include additional funds in the coverage amount to account for inflation, unexpected expenses, or other financial uncertainties. This will provide an extra layer of protection for your loved ones.

Consider consulting with a financial advisor or using online calculators to help determine the appropriate coverage amount for your term life insurance policy. They can provide guidance based on your specific circumstances and financial goals.

The Process of Applying for Term Life Insurance

Applying for term life insurance involves several steps. Understanding the application process will help you navigate through it smoothly. Here’s what you can expect when applying for term life insurance:

  1. Research and compare: Research different insurance companies and their term life insurance offerings. Compare the coverage, premiums, and customer reviews to identify reputable insurers that meet your requirements.
  2. Gather information: Before filling out the application, gather the necessary information such as your details, medical history, lifestyle habits, and financial information. This will streamline the application process and ensure you provide accurate information.
  3. Complete the application: Fill out the application form accurately and honestly. Be prepared to answer questions about your health, lifestyle, and pre-existing conditions. Providing false information can lead to complications during the underwriting process or even denial of coverage.
  4. Underwriting process: The insurance company will review your information and assess your risk profile after applying. This may involve a medical examination, blood tests, and records review. The underwriting process determines your insurability and the premium you will be charged.
  5. Policy issuance: If your application is approved, you will receive a policy offer outlining the coverage amount, term, and premium. Review the policy carefully, paying attention to any exclusions or limitations. If satisfied with the offer, sign and return the necessary documents to activate the policy.

The application process can vary slightly depending on the insurance company and your circumstances. It is essential to provide accurate information and be transparent throughout the process to ensure a smooth application to ensure a smooth application.

Factors that Affect the Cost of Term Life Insurance

Several factors influence the cost for term life insurance. Understanding these factors will help you determine the premium you will be charged. Here are the key factors that affect the cost of term life insurance:

  1. Age: Age is one of the most significant factors determining the term life insurance cost. Generally, the younger you are when you purchase the policy, the lower the premiums. This is because younger individuals are considered less risky to insure.
  2. Health condition: Your health plays a crucial role in determining the cost of your term life insurance. Insurance companies will assess your health, medical history, and pre-existing conditions. Individuals with good health and no significant medical issues typically receive lower premiums.
  3. Lifestyle habits: Certain lifestyle habits can impact the cost of your term life insurance. Factors such as smoking, excessive alcohol consumption, or participation in high-risk activities may result in higher premiums. Insurance companies consider these habits as potential health risks.
  4. Coverage amount and term: Your policy’s coverage amount and term will also affect the cost of term life insurance. Higher coverage amounts and longer terms generally result in higher premiums. Assess your needs carefully to find the right balance between coverage and affordability.
  5. Gender: Statistically, women tend to live longer than men. As a result, women often pay lower premiums than men for the same coverage and age. This is because insurance companies consider women lower risk as they are expected to live longer.
  6. Occupation: Some occupations are considered riskier than others, and insurance companies consider this when determining premiums. If you work in a high-risk occupation, such as a firefighter or pilot, you may face higher premiums due to the increased likelihood of accidents or injuries.

Understanding these factors and their impact on the cost of term life insurance will help you make informed decisions when selecting a policy. It is important to disclose all relevant information during the application process to ensure accurate premium calculations.

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Tips for Choosing the Right Term Life Insurance Policy

Choosing the right term life insurance policy can be a daunting task. Here are some tips to help you make an informed decision:

  1. Assess your needs: Start by assessing your financial obligations, plans, and loved ones’ needs. This will help you determine your policy’s appropriate coverage amount and term.
  2. Compare policies: Research and compare different term life insurance policies from reputable insurance companies. Look for policies that offer the coverage amount and term you need at a competitive premium.
  3. Read the fine print: Carefully review each policy’s terms and conditions, paying attention to any exclusions, limitations, or additional benefits. Ensure that the policy aligns with your specific requirements and provides the necessary protection for your loved ones.
  4. Consider the insurer’s financial stability: Choose an insurance company with a strong financial rating. This ensures that the company will be able to fulfil its financial obligations and pay out the death benefit when needed.
  5. Seek professional advice: If you are still deciding which policy to choose or need assistance understanding the intricacies of term life insurance, consider seeking advice from a licensed insurance agent or financial advisor. They can provide personalized guidance based on your unique circumstances.

Remember, the right term life insurance policy depends on your needs and financial goals. Take your time to research, compare, and evaluate different options before deciding. This will help ensure that you choose a policy that provides the necessary protection for your loved ones.

Term life insurance rates by age

The following are sample rates based on a 20-year term life policy.

AGE & GENDER

$50,000

$250,000

$500,000

$1,000,000

25 – Male

$8.61

$12.35

$19.11

$31.16

25 – Female

$7.83

$10.89

$15.72

$23.47

35 – Male

$9.48

$13.38

$21.28

$35.06

35 – Female

$8.66

$12.12

$17.87

$29.91

45 – Male

$15.27

$26.31

$46.27

$88.85

45 – Female

$12.83

$21.22

$37.20

$69.10

55 – Male

$31.97

$64.81

$119.13

$227.85

55 – Female

$24.71

$48.87

$88.73

$166.17

65 – Male

$81.61

$201.35

$387.35

$748.10

65 – Female

$63.12

$142.47

$264.22

$508.99

The above rates are sample prices based on non-smokers living in Kentucky with an excellent health rating. You may use our term life insurance calculator to get a quote now to estimate yours.

Is term life insurance right for you

The following are scenarios to know if term life is the best choice for you.

  • Some people need insurance coverage for a definite period. It means that you can apply for term life during the time of your life when you need it the most. For instance, if you start your family life, a 20-year term is great to offer your spouse and children coverage. 
  • People with budget constrain. It is the most affordable type and offers great coverage for what its cost.
  • People who are at the age of 50 above and still in great health condition. Policies premium indeed gets higher as people age. However, if you think that you are healthy enough, then you will surely get affordable rates.

Single individuals may not think of getting coverage, but if you are just married or planning to start a family soon, then purchasing one is a wise decision. Term life is the least expensive option for starting a family. It is enough to secure your family in case something bad happens to you. Also, it may even cover the educational expenses of your children. 

cheap life insuranceMoreover, a cheap term life insurance policy can help pay for any outstanding debt you in case you die early on. Therefore, your spouse and children do not have to carry the burden of paying for your debts.

Best term life insurance companies

COMPANY

S&P

A.M. BEST

BBB

AIG

AAA

A+

C+

Mutual of Omaha

A+

A+

A+

Savings Bank Life Insurance (SBLI)

AA-

A+

A+

Assurity

AA-

A+

A-

Foresters

AA

A+

A+

Fidelity Life

AA

A+

A-

Pacific Life

AA-

A+

A-

Prudential

AA-

A+

Not rated

John Hancock

AA-

A+

A-

Metlife

AA

A+

A+

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Frequently Asked Questions

Is it worth having term life insurance?

Term life insurance can be a valuable investment for those who want to protect their loved ones financially during their death. It is generally more affordable than permanent life insurance. It can provide coverage for a specific period, such as the length of a mortgage or until children are grown and financially independent. However, it ultimately depends on individual circumstances and financial goals. Speaking with a financial advisor is essential to determine if term life insurance is the right choice for you.

What is the main disadvantage of term life insurance?

The main disadvantage of term life insurance is that it only covers a specific period, typically 10, 20, or 30 years. Once the term ends, the policy expires, and you no longer have coverage. Additionally, the premiums for term life insurance can increase significantly as you age or if you develop health issues.

Do You Get Your Money Back at the End of a Term Life Insurance Policy?

No, you do not get your money back at the end of a term life insurance policy. Term life insurance is designed to provide coverage for a specific period, and if you outlive the procedure, there is no payout or return of premiums. However, some policies may offer a return of premium rider, which allows you to receive a refund of the tips you paid if you outlive the policy term. This rider typically comes at an additional cost.

How do I buy term life insurance?

To buy term life insurance, you should determine how much coverage you need and for how long. Then, shop around and compare quotes from different insurance companies. Once you've chosen a policy, complete the application process and undergo a medical exam if required. Finally, pay your premiums, and your coverage will begin.

How long should I have term life insurance for?

The length of time you should have term life insurance depends on your circumstances, such as your age, financial obligations, and dependents. Generally, it is recommended to have coverage for the length of time that your dependents will rely on your income, such as until your children are grown and financially independent.

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