Term Life Insurance
Term life insurance provides death benefit protection for a specific period (term), with no cash value accumulation, offering the lowest premium for the highest coverage.
Exam Tip
Term = temporary protection, no cash value, lowest cost. Pure insurance only.
What is Term Life Insurance?
Term life insurance provides pure death benefit protection for a specified period—typically 10, 20, or 30 years. If you die during the term, beneficiaries receive the death benefit. If you outlive the term, coverage ends with no payout.
Key Characteristics
| Feature | Description |
|---|---|
| Coverage Period | Fixed term (10, 20, 30 years) |
| Cash Value | None |
| Premiums | Lowest of all life insurance types |
| Death Benefit | Paid only if death occurs during term |
Types of Term Life
- Level Term - Premium and death benefit stay the same
- Decreasing Term - Death benefit decreases over time (often for mortgages)
- Annual Renewable Term (ART) - Renews yearly with increasing premiums
- Convertible Term - Can convert to permanent insurance
Term vs. Permanent Life
| Feature | Term | Permanent |
|---|---|---|
| Cost | Lower | Higher |
| Duration | Temporary | Lifetime |
| Cash Value | No | Yes |
| Best For | Temporary needs | Lifetime needs + savings |
When to Buy Term
- Mortgage protection
- Income replacement during working years
- Children's education funding
- Maximum coverage on a budget
Study This Term In
Related Terms
Whole Life Insurance
InsuranceWhole life insurance provides permanent death benefit protection with guaranteed cash value accumulation, level premiums, and coverage that lasts your entire life.
Death Benefit
InsuranceA death benefit is the amount of money paid to beneficiaries upon the death of an insured person, typically the face amount of a life insurance policy.
Premium (Insurance)
InsuranceAn insurance premium is the amount paid by the policyholder to the insurance company for coverage, typically paid monthly, quarterly, or annually.
Beneficiary
InsuranceA beneficiary is a person or entity designated to receive the death benefit or proceeds from an insurance policy or retirement account.