Because term life insurance provides life insurance coverage for a specific time period (term), it is often referred to as temporary insurance or pure insurance. The face amount of the policy is paid if you die during the term of the policy. When you live longer than the term of the insurance coverage, nothing is paid.

Who should buy term life insurance?
People with high insurance need, low cash flow
Term insurance is appropriate for situations when there is a high need for insurance but not much cash flow to pay for it. For example, a young family with limited cash resources may have a great need for survivor income to provide for living expenses and education needs. Term insurance is especially helpful here, allowing the family to buy insurance protection with minimal cash outlay.

People with short-term coverage needs
Term insurance is well suited to cover short-term needs, such as coverage during your working years, the college years, or for the duration of a loan or mortgage. Generally, a short-term need is considered to last ten years or less, and may include coverage for nonrecurring business debt security, key person coverage in a start-up business, or the young family just starting out.

Advantages of term life insurance
Low cost for large death benefit
Term insurance is generally the most efficient way to achieve maximum life insurance protection for a minimum current cash outlay. When you are young and just beginning your career or family, you may have a need for insurance but not much cash to pay for it. With a term policy, you can usually buy a larger death benefit for less cash than you could get with any other type of life insurance policy. At least this is true while you are still relatively young and healthy.

Various time frames and features
Term life insurance is pretty flexible. You can buy term insurance coverage for the time period that best suits your needs. Generally, you can increase your coverage if your needs change and renew your policy for an additional period. Increases in coverage may require new proof of insurability.

Disadvantages of term life insurance
Premiums increase at each renewal and get more expensive with age
A term policy has an endpoint, like an expiration date. When the coverage period ends, you may have the option to renew the policy, depending on the specific policy and with its stated limitations. Each time you renew the policy for an additional term of coverage, the rate increases because your age (and consequently the insurance company's risk of paying the death benefit) has increased. Eventually, you could be paying more in premiums for term coverage than if you had bought a whole life policy from the beginning. The increasing premium costs can make term insurance very expensive for long-term needs.

Termination at a certain age may be automatic
Some term policies automatically terminate at a certain age, often 65 or 70, and most people will outlive the term of the insurance. Term policies pay a benefit only when you die during the coverage period. When you live longer than the term of the insurance, your beneficiary receives nothing. There are policies available that are renewable until age 90 or 95, however. If you want a policy which provides coverage for your entire life or allows you to get cash out of the policy at some point, consider one of the permanent, cash value policies such as whole life, variable life, universal life, or variable universal life.

Learn More...

Life Insurance Overview | Understanding The Basics | Term & Cash Value
Coverage Amounts | Reading Policies | Planning Concerns | Life Calculator | Life Glossary

Please Note: The information contained in this Web site is provided solely as a source of general  information and resource.  It is a not a statement of contract and coverage may not apply in all areas or circumstances.  For a complete description of coverages, always read the insurance policy, including all endorsements.