Term Life Insurance is basic, inexpensive and easy to understand. It gives you all the coverage you need and none that you don’t. That’s why it’s the best choice for almost everyone.
As the name implies, a term insurance policy is good for a specific period of time; that can be one year, 10 years, 20 years or even up to 30 years. Given that you generally need life insurance only until you’ve managed to save up money elsewhere, just pick the term that dovetails with the time you need coverage. If you die during that term, your beneficiaries get a payout, known as the death benefit. If you die after the term expires, there’s no payout.
Term policies typically have maximum issue ages. If you’re past age 80, you’ll have a hard time getting term insurance. (You almost certainly won’t need it at that age anyway.)
Term Life Insurance Carriers
What are the different types of term insurance?
There are two kinds. There’s “annual renewable term,” which gives you one year of coverage at a time that you renew annually, and “level premium term,” which you buy for a specific multiyear period – say, five, 10 or 20 years.
Annual renewable term usually has the lowest annual premium to start, but the premium rises as you age. If your main concern is keeping your initial costs down – for example, because you think your earnings will rise significantly in the future – consider going with annual renewable term.
Level premium term lets you lock in the premium for that period; the annual premium is guaranteed never to change, from the first year to the last. That can be a smart way to insulate you from any premium increases. It’s like the peace of mind you get from a fixed-rate mortgage compared to an adjustable-rate one.
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