Term Life Insurance
This affordable, simple coverage helps protect your family by replacing your lost income in the event of a death. Term life lasts for a specific amount of time and its payments will never increase.
Term life coverage may be right if you:
What is included in a term life insurance policy?
A fixed death benefit that pays your beneficiary if you pass away during the term.
High coverage amounts relative to the price that may replace your lost income.
Premiums will never increase throughout the life of the policy.
Option to convert to a permanent plan
Term Life Insurance
* Varies by product term chosen, risk class and state.
How term life insurance works
A term life insurance policy is an agreement between you and a life insurance company: You agree to pay a premium for a specific period of time (usually between 10 and 30 years); in return, there is a guaranteed death benefit that the company promises to pay to your beneficiaries (typically your family).1 The death benefit is almost always paid out in an income tax-free lump sum of cash.2
Term life insurance is simpler and typically more affordable than permanent life insurance, such as a whole life insurance policy that provides life-long protection. Whole life policies have an added "cash value" component that can build up a valuable tax-deferred asset – money you can use during your lifetime.3,4 A term life policy has no cash value component: once the life insurance term is over, there's no value or payout to your family.
Term life insurance is simpler and typically more affordable than permanent life insurance, such as a whole life insurance policy that provides life-long protection. Whole life policies have an added "cash value" component that can build up a valuable tax-deferred asset – money you can use during your lifetime.3,4 A term life policy has no cash value component: once the life insurance term is over, there's no value or payout to your family.
The pros and cons of term life
Advantages
Cost-efficient form of coverage
Provides coverage while it’s needed most
Highest death benefit amount per premium dollar
Affordable for young, healthy policyholders
Disadvantages
No cash value component
Coverage is not permanent
Once the term expires, there’s no payout
Typically more expensive to renew when you get older
Term life insurance may cost less than you think.
A recent survey found that 43% of millennials believe that life insurance is at least six times more expensive than the actual cost.5 The chart below shows the estimated monthly costs for a $1,000,000 term coverage policy for a 30-year-old man and woman who do not use tobacco and earn $50k a year.i
Average costs for a $1,000,000 term policy
Male, Age 30
Term
10 Months
15 Months
20 Months
30 Months
Female, Age 30
Cost per Month
$ 42
$ 50
$ 61
$ 119
.
Term
10 Months
15 Months
20 Months
30 Months
.
Cost per Month
$ 34
$42
$ 48
$ 96
Why people choose universal life insurance:
our testimonials
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Leverage agile frameworks to provide a robust synopsis for high level overviews. Iterative approaches to corporate strategy data foster to collaborative thinking.
Leverage agile frameworks to provide a robust synopsis for high level overviews. Iterative approaches to corporate strategy data foster to collaborative thinking.
Leverage agile frameworks to provide a robust synopsis for high level overviews. Iterative approaches to corporate strategy data foster to collaborative thinking.
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Factors that affect the cost of a policy
As you can see, the average woman pays less for coverage than the average man. That's because women tend to live longer, and life expectancy has an understandable impact on the cost of coverage. In addition to gender, here are some other factors that affect the price of term life premiums – and why:
Coverage amount
The bigger the death benefit, the higher the cost.
While this may seem obvious, you should also know that a bigger policy can be cost-effective: if you double the death benefit, your premiums don't typically double.
Term length
The longer the term, the more you'll pay per month.
The more years you need life insurance, the higher the likelihood that the insurance company will have to make a payout to your family. However, you'll pay less for a 20-year term life policy than two consecutive 10-year policies.
Age
The older you are, the higher the cost.
The older you get, the lower your life expectancy – so you pay more for a given amount of coverage.
Health status
The better your health, the lower your cost.
Most policies are medically underwritten, which means you have to answer health questions and get a medical exam. "Guaranteed acceptance" policies don't ask about your health, but they cost more because the insurance company must assume you have health issues.
Lifestyle
Tobacco use and other hazardous activities raise your cost
Smoking and certain activities such as scuba diving increase the likelihood of a death benefit payout. However, if you quit smoking, you may qualify for lower rates after a year.
Optional riders
Additional policy features can affect cost.
Riders can enhance the value of the policy by adding flexibility and extra financial protection. Some add to the cost of a policy, but others may not.
Frequently asked questions about universal life insurance
Which is better, term or whole life insurance?
Either type of insurance provides meaningful protection and can be a good option depending on your needs. Term life insurance offers protection that lasts for (typically) a 10 to 30 year period. It is the more affordable option. Whole life insurance is permanent coverage that lasts your entire life, provided you make premium payments. Like other permanent life insurance products, a whole life insurance policy has an extra cash value component. Over time, the value of the policy can build up to become a valuable, tax-deferred asset that can be used in various ways during your lifetime.2,3,4
What happens if I outlive my term life insurance?
Term policies provide temporary life insurance protection for a specific period of time. If you outlive your policy term, life insurance coverage lapses. There is no residual cash value, and your beneficiaries will no longer get a payout if you pass away. You can apply for a new policy, but rates will be higher because you are older. If you don't like the idea of paying premiums for 20 years or more with no return, consider getting a permanent policy such as whole life insurance. As long as premiums are paid, the whole life policy will not expire, and it will earn additional cash value that can be used for things like policy loans.
What is the cost of a $500,000 term life insurance policy?
Term policies can be more cost-efficient than you might think. A female, age 30, who doesn't use tobacco can get a $500,000 20-year term policy from Guardian for just $27 a month. The same coverage amount in a 10-year term policy is even more cost-efficient: only $20 per month.
Do you get your money back at the end of a term life insurance?
Most term life policies have no face value once the term ends. The exception: A "return of premium" policy that pays back all or a portion of your premiums if you live to the end of the term. However, premiums for this type of policy can be 2-4 times higher than a regular term policy.
At what age should I buy life insurance?
You may think that life insurance is only for recent parents or mid-aged people. But young adults are in the best position to purchase a life insurance policy. When you're young, the cost is typically lower than it will be later on, so you can lock in a much better deal.
Leverage agile frameworks to provide a robust synopsis for high level overviews. Iterative approaches to corporate strategy data foster to collaborative thinking.