Guide · Coverage · 2 min read

How does term life insurance work?

Term life covers you for a set stretch of years. Here is how that stretch works, and what to ask before it runs out.

What you are buying

You pick a coverage amount and a length, often 10, 20 or 30 years. If the insured person dies during that length, the insurer pays the death benefit to the beneficiary. If the term ends first, the coverage ends too and nothing is paid.

Most term policies hold the premium level for the whole term. A few are priced to rise as you age, so check which kind you have.

Why there is no cash value

Term life usually has no cash value. Your premium pays for protection during the term and does not build savings inside the policy. That is a big reason it often costs less than permanent coverage of the same size.

When the term ends

Many policies offer renewal, which keeps coverage going year by year, usually at a much higher price that climbs with age. Some also allow conversion, which swaps all or part of the term coverage for a permanent policy without new health questions. Conversion often has a deadline, so ask for the date in writing.

You can also let the coverage end or apply for a new policy. Applying again means a fresh review, and the rate reflects how old and how healthy you are now.

Who often looks at term

Term fits needs that have an end date, such as a mortgage or the years your children depend on your income.

This guide gives general information and does not address your own policy. Your contract and your insurer decide what applies to you.