Term Insurance: Right for You?

Term life insurance provides coverage for a specific period — typically, 10-30 years. When the term expires, coverage stops. If the policyholder dies while the policy is active, beneficiaries receive the death benefit, which is usually not taxable.

Term Insurance Basics

Term insurance may be a good choice for a young family, who will receive a lump sum payout if something happens to you. Because you can tailor the length of the policy, term insurance is something to consider if you need coverage for a specified number of years, perhaps until children finish college or other training.

The Cost

Premiums are based on your age, health, life expectancy, and the policy’s payout amount and are generally lower than premiums for permanent insurance. You can usually renew your policy, although the cost will generally increase as you get older. Term insurance does not build equity.

Types of Term Insurance

There are several variations on basic term insurance.

Level Term — has fixed premiums for the life of the policy and a fixed death benefit and is the most common option.

Yearly Renewable Term — a one-year policy that can be renewed without evidence of insurability. Premiums rise each year and can become prohibitively expensive as the policyholder ages. It may be appropriate for someone who needs temporary coverage.

Decreasing Term — premium is fixed but the death benefit declines each year according to a predetermined schedule. This type of term policy is often used in conjunction with a mortgage, where the payout is tied to declining loan principal.

Your insurance professional can discuss term insurance options and explain the differences between term and permanent life insurance to determine which one is right for you.

*Applications for life insurance are subject to underwriting. No insurance coverage exists unless the required premium is paid. Accessing cash values may reduce the death benefit and policy values, trigger tax consequences, surrender fees, and charges, and may require additional premium payments to maintain coverage. Guarantees are based on the claims-paying ability of the issuer.