What is term life insurance?

Term life insurance is one of two major types of life insurance you can buy. (The other is called “whole life.”) Like nearly every kind of life insurance, the purpose of term life is to help you protect your family financially when you aren’t around. It pays them money (called a “death benefit”) they need to cover funeral expenses, mortgage payments, car payments, and other monthly bills. Or to help with big, long-term expenses, like your kids’ education.

So, how is term life different from other types of life insurance? The short answer is, it ends. Unlike whole life, which covers you for the rest of your life, term life lasts a certain number of years—usually 10, 20 or 30—or until you reach a certain age—say 80 years old. If you pass away during that time, your loved ones get the money. However, once the term you selected comes to an end, so does your coverage.

Many people who go with term life insurance choose a term that covers the years when they know their families will need money most—for example, the years when their kids are still in school and college.


Three reasons to choose term life

  1. Your life has changed. Getting married, having a child, buying a house or condominium, sending a child off to college—these are big changes that can mean more or bigger bills. Term life can help prevent your family from struggling with those bills if you aren’t around.
  2. Savings. For many people, the decision to choose term life insurance comes down to one main concern: money. Since term insurance covers you for a limited period of time, it generally costs less than whole life. That can make it an affordable choice for people who want to protect their families but already have their hands full with monthly expenses.
  3. The policy usually builds cash value over time—see more about that below.
  4. Flexibility. If your needs change or you want life insurance that covers you for your entire lifetime, you can usually convert your term insurance policy to “whole life.” In many cases you can do that quickly and simply, without a complicated approval process.

When should I get term life?

The amount you pay for life insurance is tied to your age. Meaning, you’ll pay less if you get life insurance when you’re younger. By the time you reach 65, you might find it difficult to buy a term policy that lasts more than ten years. And the policies available could be very expensive.

  1. Your life has changed. Getting married, having a child, buying a house or condominium, sending a child off to college—these are big changes that can mean more or bigger bills. Term life can help prevent your family from struggling with those bills if you aren’t around.
  2. As you get older, there’s a higher chance you’ll develop a serious health problem. If you wait, you might not be able to get life insurance at all.

Key features of term life insurance

  • You can decide on the term—term life insurance typically covers you from between 1 and 30 years, but some terms can be even longer
  • If you pass away during the term your policy covers, your loved ones receive a cash payout in the amount of the policy
  • Your beneficiary (the person you select to receive the money from your policy) gets that cash tax-free—in most cases there are no income taxes on a life insurance payout
  • If your term ends, you can choose to renew it or purchase a different policy—although you will probably pay more, depending on your health and age
  • Many term life insurance policies can be converted to whole life if that’s something that appeals to you

How to learn more about life insurance

Life insurance may seem complicated, but it’s not that hard once you know the basics. Of course, we are happy to help. You can also use the TruStage Life Insurance Calculator to compare different types of insurance and learn more about your options.


Keep reading:

What is life insurance?
A life insurance policy is a contract with an insurance company. Learn about the different types of life insurance policies and how life insurance works.

How much life insurance do you need?
This article walks you through several popular methods for estimating how much life insurance you need to ensure your family’s future.

Introduction to life insurance
In this article you will learn about basic life insurance so you can make a more informed decision about how to protect your family's financial security.