Life insurance is a go-to to financially protect a growing family, a developing estate, or a flourishing new business. Term life insurance is a logical and affordable way to insure the things you’re setting in motion and have set in motion and to protect the future of the ones you love. With a diversity of needs to insure, different types of term life insurance policies are available for your unique circumstances.

Use Insurify to help find the right life insurance policy to cover the important ventures in your life. If you’re starting a family, purchasing a home, or taking the plunge on your own business, the right life insurance policy will provide financial protection for your loved ones and important financial obligations.

What Is Term Life Insurance?

Term life insurance is a type of life insurance that lasts a period of time, such as 10 or 20 years, then expires. If you pass away during the term length, the policy will pay out a death benefit to your beneficiaries. Most term policies are renewable at the end of the term, without evidence of insurability but with a premium increase. They also may be converted to a permanent policy.

Permanent life insurance, also called whole life insurance, lasts the policyholder’s lifetime and grows cash value. Different types of permanent coverage are identified by the way they grow cash value. Universal life insurance and variable life insurance are types of whole life policies where cash value grows in investment accounts and the death benefit may be subject to the market. Traditional whole life policies have a guaranteed death benefit.

Why Choose Term Life Insurance?

Term life insurance is less expensive than permanent life insurance policies. Your premium payments stay level for the length of the term. Level premiums for the term period is an advantage. If you have a 30-year term policy, you will have affordable premiums for the duration. If you have a renewable term policy, you do not need to prove insurability to continue coverage; however, you’ll pay higher premiums.

If you have a convertible term life insurance policy, you can convert your life insurance coverage to permanent coverage. Insurers usually give policyholders a set number of years to convert their coverage. For example, you may have a 20-year term policy with the ability to convert it for the first 10 years or until a certain age, like 65. This feature allows you to have lower premiums until you are ready for permanent coverage.

Life insurance companies sometimes offer a return of premium rider for term life insurance policies. This rider provides a provision for the policy owner to receive all or a portion of their premiums paid if they outlive the policy. Interest is not included in the return of premium, and you cannot cancel the policy and receive your premiums back. This rider may be provided at an extra cost. 

Types of Term Life Insurance

Term life insurance comes in a variety of forms to cover your insurance needs, including funeral costs, mortgage protection, extended coverage, and added benefits to an existing policy. Term life insurance riders are insurance products that can supply additional benefits, such as living benefits, to your life insurance policy. This enables you to mold your life insurance policy to fit your financial needs.

Level Term Life Insurance

Level term life insurance is the most common type of term life insurance. These policies provide a level death benefit and level premiums for the term period. Most level term policies are renewable, should you outlive the life of the policy, and convertible. Level term life insurance is usually less expensive than whole life policies. Premiums are determined during underwriting; your age and the amount of coverage you buy are factors, too.

Decreasing and Increasing Term Life Insurance

Decreasing term life insurance is typically used to cover important financial obligations, like a mortgage or car payments. It allows peace of mind for the insured person should they pass away before the debt is paid. Decreasing term life insurance premiums decrease along with your loan payments and the face amount until the loan reaches zero. Should you pass away during the term period, the remainder of the debt is covered.

Increasing term life insurance is the opposite of decreasing term: the premiums increase with the face amount of the policy. Increasing term policies are most commonly used to cover the cost of inflation as time progresses. It may also be used if you foresee needing more coverage in the future and do not wish to apply again or take another medical exam.

No-Medical-Exam Term Insurance

Permanent life insurance policies that do not require a medical exam are usually very expensive and typically purchased as a last resort. No-medical-exam term life insurance policies are less expensive, though rates are higher than a term policy with an exam. These types of policies are quick to get, but applicants usually have an age limit of up to 65.

Group Life Insurance

Usually a one-year term life insurance policy, group life insurance policies are most commonly used as a part of a workplace benefits package. Group life insurance covers a group of at least 10 people who are a “natural group” formed for reasons other than to purchase insurance. Natural groups include employee groups, association groups, and labor unions.

Accidental Death Term Rider

Most people attach an accidental death term rider to their policy to increase their coverage at an affordable price. An accidental death benefit rider is usually double or triple the face amount of the base policy. The additional amount will be paid to the beneficiaries if the insured dies due to an accident. These riders usually expire at age 60 or 65.

Living Benefit Riders

Living benefit riders include long-term care riders, critical illness riders, and accelerated death benefit riders. These riders provide a percentage of the death benefit to be paid out if you become critically ill, suffer from an event that leaves you with a disability, or require long-term care services, such as nursing home care. These riders may reach the term by a certain age.

Riders for Additional Insureds

Term life insurance riders are also used to cover the lives of additional insureds that you have an insurable interest in. These include a children’s term rider, which usually ends by the time the child becomes an adult. And a family term rider covers numerous family members, usually a spouse and children, each with an equal amount of coverage. A spousal rider may cover the life of a spouse.

Uses of Term Life Insurance

All the aforementioned term life insurance policies and riders offer practical uses of term life insurance. Because term life insurance lasts a specific amount of time, it’s great for additional coverage for a number of years, like when your children are young, and to cover important financial obligations, such as your mortgage. But life insurance is most commonly used to financially protect the insured’s survivors.

Survivor Protection

Most personal life insurance policies are bought to protect survivors from lost income resulting from your death. The policy’s death benefit goes to the beneficiaries to cover any immediate or long-term expenses. This can range from income for daily living expenses to setting up an education fund to paying off existing debt and funeral expenses.

Creating an Estate

Life insurance can create an instant estate for your beneficiaries. The death benefit avoids probate, meaning upon the insured’s death, it bypasses debt collectors and goes straight to the beneficiaries to use as they choose. Life insurance face amounts can range from thousands of dollars to millions of dollars, creating an inheritance for your survivors. 

Conserving an Estate

Life insurance may also conserve an estate. If you have significant assets, life insurance removes or reduces the need to sell assets to pay estate taxes and any debt the estate faces upon the insured’s death. This allows for the estate to remain untouched for the insured’s heirs.

With Insurify, you can compare life insurance quotes from the best life insurance companies within a matter of minutes. Simply answer a few qualifying questions, such as your age, the state you live in, and how much life insurance you would like to buy. In almost no time at all, you can speak with a representative from a life insurance company or apply online.

Frequently Asked Questions

What makes term life insurance a good option?

Term life insurance is a more affordable life insurance option than permanent life insurance. It does not have a savings feature but can typically be converted to a permanent policy when you're ready. Term life insurance can also financially protect important expenses, such as your mortgage.

Do term life insurance premiums stay the same?

Premiums of term life insurance policies stay the same for the length of the term. If you have a five-year term policy, the premium term will also be for five years. If you renew your policy at the end of the term, the premium increases, and a new premium term begins.

What are the uses of term life insurance?

Life insurance is generally used for financially protecting your loved ones. The death benefit of a term life insurance policy can be used to set up an inheritance for your heirs, ensure that their immediate and future expenses can be paid, and ensure your estate remains intact for your beneficiaries.

Term Life Insurance Is an Insurance with Many Functions

With different types of term life insurance policies and riders on the life insurance market, term life insurance may add a variety of functions to your financial toolkit. Having a term life insurance policy can help financially protect your family from loss of income due to your death, ensure your mortgage and child’s tuition are secure and add additional coverage to your policy to cover your financial needs.

When on the hunt for the best life insurance policy to help protect the ones you love, Insurify is your ally. Searching the life insurance market for the policy with the right coverage at the right price may seem like an insurmountable feat. Let Insurify steer you in the right direction to find the best life insurance company with a policy that’s right for you.

Updated September 7, 2021

Aissa Martell is a licensed insurance producer in the State of New York. She is a creative writer and has been freelance writing for five years. She’s happy to share her knowledge of the insurance industry and its products.