What is Term Life Insurance?

UPDATED: Mar 2, 2020

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It’s simple, low-cost coverage. Minus the bells and whistles.

Term life insurance is the most basic and least expensive form of life insurance you can buy. There are no investment accounts, cash values or policy loan features on term life. Which is good, because those things just cost you money.

Term life provides protection for a specified period, or the “term.” You can buy a term life policy for terms of 10, 15, 20, 25 or 30 years. The policy will pay a benefit to your beneficiaries if you die during the term.

Let’s sum it up this way:

Term life insurance is…

Inexpensive. You pay for what you need and nothing else. This means you get the highest amount of life insurance protection for the lowest cost when compared to other types of life insurance.

Simple. It’s pure life insurance protection. Nothing more, nothing less. You can even buy it without a medical exam.

Temporary. It will expire one day, either 10, 15, 20, 25 or 30 years from when you buy it. You decide how long you’ll need it and that’s what you pay for. Don’t worry, though. There are options for extending it if you need to.

Flexible. Use it to protect your family, pay estate taxes, secure a bank loan and more. Have a business? You can use it to protect key employees, fund buy-sell agreements or help grow your company.

Term life insurance is not…

Permanent. Let’s be clear about this. If you need life insurance beyond the next 30 years, you’re better off with a whole life or universal life policy. Although you can extend a term life policy beyond its term, it’s often more expensive in the long run.

A Savings Plan. Term life is not a savings plan like a bank account, CD, money market fund, etc. But you can take the money you save by buying term life and put it in a real savings account!

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