How does term life insurance work?
Taking out a life insurance policy ensures your loved ones have financial support if you suddenly pass away. You can also use life insurance as an investment vehicle, a source of cash, or a way to pay off debts you leave behind.
The exact benefits will depend on the type of life insurance policy you purchase, though — and there are many options to choose from. Arguably, the most popular option is term life insurance. Term life insurance is one of the simplest and cheapest forms of life insurance on the market so if you're considering getting insured then it helps to understand how it works.
Start by getting a free price quote so you know exactly what to expect.
How does term life insurance work?
Term life insurance is a type of temporary life insurance. It covers you for a set period of time — usually 10, 20, or 30 years. Then, if you pass away during the coverage period, your beneficiaries are paid a death benefit, which they can use as financial support or to pay off funeral costs, medical bills, or debts you leave behind (like a mortgage loan, for example).
Some term life insurance policies also have a decreasing death benefit as you get further into your policy. Others may be "convertible" policies, meaning you can convert them into a whole life insurance policy with a cash value component that grows over time.
What does term life insurance cost?
The exact premium you'll pay for a term life insurance policy depends on your age, your policy's term, your health, gender, and other factors. According to Progressive and Fidelity Life Association data, the average costs for a 10-year, $250,000 policy look something like this:
AGE | MALE | FEMALE |
20 | $13.48/month | $12.17/month |
30 | $13.48/month | $12.40/month |
40 | $16.31/month | $15.22/month |
50 | $32.84/month | $29.36/month |
60 | $74.82/month | $56.98/month |
Keep in mind that these are averages from just one company. Premiums can vary quite a bit from one insurance provider to the next, so make sure to compare at least a few term life insurance providers before deciding where to get your policy.
Find out what a term life insurance policy would cost by getting a free price estimate now.
Who benefits from term life insurance policies?
Term life insurance plans are best for people who want coverage for a specific, short-term purpose — maybe to pay off a mortgage loan or ensure their kids are supported through age 18 or into college.
Since term life insurance policies tend to be more affordable than other types of life insurance policies, they're also smart for those who are on a tight budget or who want the protection of life insurance without much financial investment.
When to explore other options
Term life insurance policies aren't right for everyone. If you want lifelong protection, for example, term life may not be a good fit. Additionally, if you want a policy that has a cash value you can pull from or one that includes an investment or savings component, term life isn't it, either. In these cases, you may want to explore options like whole life insurance, universal life insurance or variable life insurance instead.
If you're not sure which type of life insurance is right for your needs and budget, reach out to an independent insurance agent. They can help you determine the insurance policy and coverage amount that's right for you. You can also get a free online price quote to measure against or use the table below to compare some top providers on the market.
