How Term Life Insurance Works

Term life insurance provides you with temporary life insurance for a specific number of years. You can choose coverage for a "term" of 10, 15, 20 or 30 years.

Term life builds no cash value inside the policy, it is not an investment, it is "pure protection". That’s why it usually costs 2 to 3 times less than permanent life insurance.

• Term life is the lowest cost type of life insurance.
• Term life insurance lasts for a set period of time up to 30 years.
• Term life policies pay the beneficiary the face amount of the term life policy if the insured person dies during the term of the policy. 
• For example, a 10-year term life policy with a face amount of $250,000 would pay $250,000 to your beneficiary if you die any time during those 10 years. 
• If you're alive at the end of the policy term, the coverage ends. 

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Term Life Insurance Has Three Standard Features:

1. Level
   The annual insurance premium for your life insurance policy stays the same each year. The face amount of life insurance coverage also stays the same. Level term life insurance policies can last up to 30 years.
   
   
2. Convertible
   Before the end of the term for your policy, the life insurance policy owner (you) may be able to convert the term life insurance policy into a permanent life insurance policy. The owner usually has a specific number of years during the term life insurance policy to convert the policy. Your life insurance premiums will be higher for the permanent life insurance.
   
   
3. Renewable
   Term life insurance policies that are renewable offer the owner of the policy the option of renewing the life insurance policy at the end of the term, up to a specific age limit (usually age 65 or 70).
   
   For example, a 15 year policy may be renewed for another 15 years when the first policy ends. If the policy is renewed, a medical exam may or may not be required. The term life insurance premium will usually increase when the policy is renewed.

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How Term Life Insurance Works