Term Life Insurance
Plain English
Term life insurance covers you for a set number of years, such as 20. If you die during that time, it pays your beneficiaries. If you outlive the term, it ends without paying, unless you renew, usually at a higher price. It doesn't build savings, so it's generally cheaper than whole life.
Read to the end to complete this term.
On this page
Definition
Term life insurance pays a death benefit if the insured person dies during a set period, such as 10, 20 or 30 years. Premiums generally stay level for the term and rise if the policy is renewed at the end of it. It has no cash value, which is why it typically costs less than permanent life insurance.
Why It Matters
Many families need coverage most while children are young or a mortgage is large. Term insurance matches that period at a lower cost than permanent coverage.
Real-World Example
Imagine a 32-year-old buys a 20-year term policy with a $500,000 death benefit to cover a mortgage and young children. The premium stays the same for 20 years. If they die at 45, the beneficiaries receive $500,000. If they're alive at 52, the term ends, and renewing would cost more.
Common Misconceptions
- Assuming term life builds cash value.
- Not planning for the premium increase if you renew after the term.
Key Takeaways
- Texas Department of Insurance: "Term life insurance offers protection for a set period of time."
- Per TDI, premiums "will stay the same for the entire term. They'll go up if you renew at the end of the term."
- Term life has no cash value.
- Employer group life is often term coverage that typically ends when you leave the job.
Frequently Asked Questions
What happens at the end of the term?
Coverage ends unless you renew or convert, if the policy allows it.
What's it commonly confused with?
Whole life, a permanent policy that builds cash value.
Related Terms
Related Coverages
- Life Insurance
Related Scenarios
Explore the rest of the Life Insurance category.
Browse Life Insurance terms →Sources
The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- Life insurance guideTexas Department of Insurance
Educational information, not advice: This page is for general education only, not legal, financial, or insurance advice. Actual coverage, discounts, and requirements depend on your policy’s wording, your insurer, and the laws of your state. Confirm specifics with your own insurer or a licensed agent before making a decision. Insurpedia does not sell insurance and does not recommend specific insurers.