Term Life Insurance
Life insurance that provides a death benefit for a specified period—typically 10, 20, or 30 years—with no cash value accumulation.
Term life insurance provides a death benefit—a lump-sum payment to your beneficiaries if you die during the policy term—without any savings or investment component. If you outlive the term, the policy expires with no payout and no cash value returned (unless you purchased a return-of-premium rider). Terms commonly available are 10, 15, 20, 25, and 30 years.
Term life is the most affordable form of life insurance because it is pure protection with no cash value accumulation. A healthy 35-year-old male can purchase $500,000 of 20-year level term coverage for $25–$35 per month. Most financial planners recommend term life for income replacement: buy coverage equal to 10–12 times your annual income for a term that covers your working years and mortgage payoff period.
The main limitation of term is that coverage eventually ends. If you need coverage beyond the term (e.g., for estate planning or to cover a permanent dependent), you may face much higher premiums at renewal or be uninsurable if your health has declined. Level term policies lock in premiums for the full term, providing budget certainty.
Real-World Example
The new parent purchased a 20-year $750,000 level term policy for $38/month, ensuring her family could pay off the mortgage and fund the children's college if she died before age 55.