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What is Term Life Insurance?

Term Life Insurance is a basic form of life insurance purchased for a set period of time (called "the term"). You agree to pay a yearly premium for a agreed upon number of years. A 10 year term policy is in effect for 10 years, a 15 year term policy is in effect for 15 years, etc. At the end of the term, the policy lapses and neither you or the insurance company have any assets or other interest in the policy. Term life insurance has no cash value associated with the policy. If you were to die during the policy term, the insurance company will pay your beneficiaries the agreed upon amount of the policy. If you die after the term has expired, there is no death benefit paid.

The premium of a term life policy does not change over the course of the term - you pay the same amount each year of the term until the term is over (this is sometimes called level term).

Term insurance can generally be renewed as the term expiration nears, but usually at a higher premium (since you will be older and thus closer to death). If you plan to use term life insurance as your primary life insurance, you should check on the premiums charged for older ages, and use these premium amounts to gauge your future life insurance costs.

Some term life policies are convertible, which means they can be converted to whole life policies or endowment life policies. Again, your premiums will increase for convertible insurance policies.

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