The Benefits And Drawbacks Of Term Life Insurance

This article on Life Insurance is provided by Everplans — The web's leading resource for planning and organizing your life. Create, store and share important documents that your loved ones might need. Find out more about Everplans »

A Term policy is like renting Life Insurance for a set amount of time. It's more affordable than Permanent Insurance but will expire at some point.

Term Insurance Basics

You purchase this insurance for a set amount of time, or a "term," often in 5, 10, 20, or 30 year increments. It's usually at a set price, which means you pay the same amount of money for the policy ever year until the term is up. If you should die during the term, the beneficiaries of your policy will receive the value of the policy. If you don't die during the term, there's no payout. (The good news is you're still alive!)

Cost

For the most part, Term policies are less expensive than Permanent or Whole Life Insurance. The premiums are generally fixed and don't change over the course of the policy. However, the premium can vary from person to person, and depends on a number of factors, including your age, health, and lifestyle. For example: An older person who smokes will generally pay higher premiums than an older person who doesn't.

For help figuring out how much Life Insurance you need, see our article How Much Life Insurance Do You Need?

Convertibility

In many cases, Term insurance is not available for people over the age of 65. However, in certain cases and with certain policies, it can be converted to a Whole Life policy without “evidence of insurability” (a medical exam). This would allow you to retain coverage even if your term policy were to expire. However, even when a Term policy can be converted to a Permanent one, there may be a cut-off age when it can no longer be converted. If you're interested in converting an existing Term policy, it's best to speak with a professional Life Insurance agent about your situation.

To learn more about permanent (Whole Life) insurance, see our article Permanent Insurance.

State-By-State Health, Legal, And End-Of-Life Resources

Life Insurance