Term Life Insurance

By Chris Gavrel, Licensed Agent · 4 min read

Term life insurance is the simplest kind of life insurance: coverage for a set number of years, usually at a lower cost. Here’s how it works and who it might fit.

How term life works

You pick a coverage amount and a length of time. That’s the “term.” Common terms are 10, 15, 20, or 30 years. You pay premiums, and if you pass away during the term, your beneficiary receives the death benefit. If you outlive the term, coverage generally ends and nothing is paid out.

Because term policies don’t build cash value and only cover a set period, they’re usually the most affordable way to buy a larger amount of coverage.

What term life is good for

Term coverage is built for needs that have an end date:

Raising children: coverage until they’re grown and on their own
A mortgage: coverage that lasts about as long as the loan
Replacing income during your working years
Protecting a spouse until retirement savings are in place
Business loans or obligations that will be paid off

Choosing the length of the term

A simple approach: ask when your biggest obligations will be finished. If your youngest is 8 and you want coverage until they’re through school, a 15- or 20-year term may make sense. If you just took out a 30-year mortgage, you might match that. When in doubt, many people choose a slightly longer term so coverage doesn’t run out right before it’s needed.

Types of term policies

Type	How it generally works
Level term	Premium and death benefit are designed to stay the same for the whole term. The most common type.
Annual renewable term	Coverage renews each year at a higher premium as you get older.
Decreasing term	The death benefit gets smaller over time, often to match a shrinking loan balance.
Return of premium term	Costs more, but may refund premiums if you outlive the term and meet the policy’s conditions.

Features to ask about

Conversion option: Many term policies let you convert to permanent coverage without new health questions, but only until a certain age or year. This can be very valuable if your health changes.
Renewability: Some policies can renew after the term ends, usually at much higher premiums.
Riders: Optional features, like an accelerated death benefit if you become terminally ill. Some cost extra.

What happens when the term ends?

This is the part people forget. When the term ends, you generally have a few choices:

Let the coverage end, if you no longer need it
Renew, if the policy allows, often at a much higher premium
Convert to permanent coverage, if you’re still within the conversion window
Apply for a new policy, based on your age and health at that time

Put the end date and any conversion deadline on your calendar. Review your options a few years before the term ends, not a few weeks.

Term vs. permanent

Term usually costs less for the same death benefit, but it doesn’t last forever and doesn’t build cash value. Permanent coverage is built to last your whole life and builds cash value, but it costs more. Plenty of families use both: term for the big, temporary needs, and a smaller permanent or final expense policy for lifelong ones. Learn more in Permanent Life Insurance.

Coverage through work

Many people have some term life insurance through their job. It’s a nice benefit, but it’s often limited, and it usually ends when you leave or retire. Find out how much you have, and think about whether you’d want coverage that stays with you.

Questions to ask

How long will my premium stay level?
Can I convert this policy, and until when?
What happens at the end of the term?
Are there any riders included, and do they cost extra?
Is this amount enough for what I want it to do?

Common term life mistakes

Choosing a term that’s too short to save a few dollars, then needing coverage later at an older age
Forgetting the conversion deadline and losing the chance to keep coverage without new health questions
Relying only on work coverage that ends when the job does
Never updating beneficiaries after marriage, divorce, or a new child
Dropping a policy before replacing it. Always keep current coverage until a new policy is approved

Pick the right length. Know your conversion deadline. Keep your beneficiaries current.

That’s most of it.

Coverage and pricing vary by age, health, state, and carrier. If you’d like help figuring out how much coverage and what length make sense, I’m happy to talk it through. You can also start with my article How Much Life Insurance Do I Need?

This article is for general educational purposes only and is not legal, tax, or financial advice. Coverage, pricing, and availability vary by age, health, state, and carrier.