Term life insurance is a type of life insurance that provides coverage for a specific period, such as 10, 20, or 30 years. If the policyholder dies within this term, a death benefit is paid to the beneficiaries. Unlike whole life insurance, which covers the policyholder for their entire life and accumulates cash value, term life insurance is straightforward, affordable, and does not include an investment component.

The length of your term life insurance policy should match the duration of your financial obligations. Consider factors like the ages of your children, the length of your mortgage, and when you expect to retire. For example, if you have young children and a 30-year mortgage, a 30-year term policy might be appropriate to ensure your family is protected until your kids are independent and your mortgage is paid off.

To determine the right amount of coverage, calculate your financial obligations, such as debts, future expenses like college tuition, and income replacement for your family. A general rule is to aim for a death benefit that is 10-12 times your annual income, but you should tailor the amount to your specific needs, ensuring it will adequately support your family in your absence.

When your term life insurance policy expires, coverage ends, and no benefits are paid. You can choose to renew the policy, often at a higher premium, convert it to a permanent policy, purchase a new term policy, or let it expire if your financial situation no longer requires life insurance coverage.

Many term life insurance policies are renewable and convertible, offering flexibility as your needs change. Renewable policies allow you to extend coverage without a medical exam, though premiums increase with age. Convertible policies let you switch to permanent insurance, providing lifelong coverage without a new health assessment.

The cost of term life insurance depends on factors like your age, health, lifestyle, term length, and coverage amount. Generally, younger and healthier individuals pay lower premiums. For example, a healthy 30-year-old might pay $20-$30 per month for a 20-year, $500,000 policy, while a 50-year-old with health issues might pay $100 or more for the same coverage.

You can still obtain term life insurance if you have a health condition, but it may affect your premiums. Insurers evaluate your health during underwriting, placing you in a risk category that influences your rate. No-medical-exam policies are available for those with serious conditions, though they tend to be more expensive and offer lower coverage amounts.

If you outlive your term life insurance policy, the coverage simply ends, and no death benefit is paid out. At this point, you can choose to renew the policy, usually at a higher premium, convert it to a permanent policy if that option is available, purchase a new term policy, or let the coverage lapse if you no longer need life insurance.

Term life insurance is not considered an investment in the traditional sense because it does not accumulate cash value like whole life insurance. However, it is a cost-effective way to provide financial protection for your family during the years when they are most vulnerable, making it a valuable tool in your overall financial plan.

When choosing a term life insurance policy, consider the reputation of the insurer, the flexibility of the policy, the cost of premiums, and whether the policy includes options for renewal or conversion to permanent insurance. Additionally, evaluate the term length and coverage amount to ensure they align with your financial goals and obligations.