What is term life insurance?

What does term life insurance mean?

Term life insurance is one of the two major types of life insurance you can buy (the other is whole life). Its purpose is to help financially protect your family for a certain number of years.

What does term life insurance cover?

Term life insurance covers the life of the policyholder. In the event of your unexpected death, your active term life insurance coverage would provide a payout to your beneficiaries — the person or people you choose to receive the policy benefit.

Your beneficiaries could then use this cash however they choose. Many policyholders choose term life to help ensure that their family can cover new financial responsibilities like mortgage payments and childcare costs.

How long does term life insurance last?

Typically, you can choose for your term policy to last anywhere between 10, 20 or 30 years. Some term life policies are also designed to offer coverage until you reach a certain age — let’s say 80 years old, for example.

When does term life insurance end?

Term life insurance ends when the period of coverage is over. If you have a 10-year-long term life policy, your coverage will end 10 years from when you purchased it. At the end of your term, your coverage will no longer help protect your loved ones with a cash benefit. That said, some policies may be renewed for a new term of coverage or converted to a whole life policy.

What influences the cost of term life insurance?

Individual traits like your gender, age and health can influence the cost of term life insurance. Typically, the older you are, the more you’ll pay for term life insurance. If you have any major health conditions, this could also lead to higher premiums.

The amount of term life coverage and the length of your policy also play a role in cost. In general, a term life policy with higher coverage and a longer duration will lead to higher premiums. That’s simply because you’ll be covered for longer and your loved ones could receive a larger benefit.

When should I get term life insurance?

The amount you pay for term life insurance is tied to your age, meaning you could pay more for term life coverage if you wait until you’re older. By the time you reach 65, the cost of a term policy may be more than you’re willing to pay.

For this reason, it’s often considered beneficial to get term life insurance while you’re younger. This can help you protect your loved ones financially while avoiding more expensive premiums.

What are the differences between term life and whole life?

How long coverage lasts

Term life insurance and whole life insurance have several fundamental differences. Unlike term life insurance, which covers you only for a certain period of time, whole life insurance is designed to last your entire life. This means you could guarantee that your loved ones receive a cash lump sum when you pass away, as long as you pay your premiums. Term life insurance provides your loved ones with a cash benefit only if you pass away during the period of active coverage.

Differences in cost

Because term life insurance offers coverage only for a set period of time, it often costs less than whole life insurance. This helps make term life a more affordable choice for people who want to help protect their loved ones but may not be able to manage the more expensive premiums that come with whole life.

More choice

When you purchase a term life policy, you’re often able to choose between different lengths of coverage. This helps give you more control over how long you’ll pay premiums for. When you purchase a whole life insurance policy, you’re signing on to pay your premium for the rest of your life.

Three reasons to start a term life policy

Your life has changed

Getting married, having a child, buying a house and sending a child off to college — these are big changes that can lead to bigger bills. Term life insurance coverage could help your family keep up with expenses without your income.

Savings

For many people, the decision to choose term life coverage comes down to one main concern: money. The lower premiums that often come with term life insurance help keep the cost of coverage within budget when you already have your hands full with other monthly expenses.

You could convert your policy

Before a term life policy ends, many insurance companies give you the option to convert it to a whole life policy. In many cases, you may be able to do that without a complicated approval process. This helps make term life insurance an attractive option if you’re looking for coverage but don’t feel ready to purchase a whole life policy quite yet.

Key benefits of term life insurance

• You can decide the term – Term life insurance offers coverage for one to 30 years, but some policies could last even longer.
• A cash payout – If you pass away during the term your policy covers, your loved ones could receive a cash lump sum in the amount of your policy.
• Generally income-tax-free – Your beneficiary generally receives the cash payout tax-free.
• You could renew it or purchase a different policy – If your coverage ends or your needs change, you could choose to renew term life insurance or purchase a different policy.
• You could convert it – Many term life insurance policies may be converted to whole life.

Term life insurance is a valuable tool that can help your loved ones manage new financial responsibilities in case you’re no longer there. You can begin your search for term life insurance today by getting a quick quote from TruStage®.