Term life insurance covers you for a period you choose, typically one, five, ten, fifteen or even twenty years. If you die while the term life policy is in effect, the insurance company pays the face value of the policy to your beneficiaries; if you outlive the policy, nothing is paid to your beneficiaries and no equity is built up in the policy itself. Because of this, term life insurance is the least expensive type of life insurance available.
Term life insurance benefits can offer you a number of different options, including:
Convertibility
— Many term life insurance policies can be converted to whole life or universal life policies, which allow you to use all or most of the premiums you have paid to offset the cost of the new policyRenewability
— Some term life insurance policies allow you to renew your policy when it ends without having to go through the process of reapplying (and re-qualifying) for coverage. It is always wise to buy life insurance that offers this feature.Combined term
— Term life insurance policies can cover more than one person, paying a death benefit when one of the two people covered by the policy dies. This is a useful way to be sure that a surviving spouse has adequate financial resources.
Term life insurance may make sense for you if you:
- Need a high level of coverage for a specific period of time, perhaps while you are raising a family or have other responsibilities.
- Are price sensitive.
- Do not want to use insurance as a way to build your investment portfolio.