Insurance
What is Term Life Insurance?
Term life insurance covers you for a set period, such as 10, 20, or 30 years. If you die during the term, your beneficiaries get the payout. If you outlive it, coverage ends. If the insured dies during the term, the death benefit is paid to the beneficiary. If the term expires before death, coverage ceases without any residual value. Unlike permanent policies, term life insurance does not build cash value, making its premiums significantly cheaper and more straightforward.
Term life is commonly used to cover temporary financial obligations, such as the duration of a mortgage or the years until children reach financial independence, providing cost-effective peace of mind during high-liability phases of life.
At a Glance
PRACTICAL EXAMPLE
A 30-year-old parent purchases a 20-year, $500,000 term life insurance policy for $25 per month. If they pass away before age 50, their beneficiaries receive the $500,000 payout. If they survive to age 50, the policy terminates with no cash value returned.
Official References
- Life Insurance — Securities and Exchange Commission
- Var Life — Securities and Exchange Commission
Last reviewed: July 12, 2026
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