Term Life Insurance Policy

If you have financial dependents, a term life insurance policy could be an important consideration for you. Term life policies provide financial protection for a predetermined period of time and pay out a death benefit to the beneficiary if the policyholder dies within the term.

Term Life vs Whole Life

Unlike whole life policies, which remain in effect for the policyholder's entire life, term life policies expire after a specific amount of time (typically between five to 30 years).

Another key difference is that term life policies do not accrue cash value like a whole life policy.

A term life insurance policy may work for you if you only need coverage for a limited amount of time (such as when your children are young), especially since permanent life insurance can be more expensive than term life plans.

Term Life Coverage

Term life insurance policies have varying coverage levels to meet a wide range of needs. When shopping for a policy, it helps to think through both the short and long-term needs of your financial dependents. If you died, how much money would your beneficiaries need to replace your lost income?

To find your target coverage amount:

Add your annual salary (times the number of years that you want to replace income) + your mortgage balance + your other debts + future needs such as college and funeral costs.

Features of Term Life Plans

There are several features of term life insurance to consider, including:

The pricing structure. Some policies increase in price every year. Others have a fixed premium over a specific set of years, but then rise. Other may stay level. You should plan ahead to what you’ll likely be able to afford.
Return of premium. Some policies return part of your premium payments if you outlive your term. Be sure to ask your insurance agent about your options.
Your beneficiaries. You can choose whomever you’d like as your policy’s beneficiaries, from a spouse to charitable organizations. But remember — if you you outlive the term of the policy, your beneficiaries will not receive a payout.