What Is Term Life Insurance and How Does It Work?

The short answerTerm life insurance covers you for a set period, such as 10, 20 or 30 years. If you pass away during the term, your beneficiaries receive the death benefit, generally income-tax free. If you outlive the term, coverage ends. It usually offers the most coverage for the lowest price, which is why it's often the starting point for young families.

How it works

You choose a coverage amount and a term length.
The premium usually stays level for the whole term.
There's typically no cash value; you're paying for protection only.
At the end of the term, you can usually let it end, renew at a much higher yearly price, or convert it if the policy allows.

Who it's best for

Term fits needs that have an end date: raising kids, paying off a mortgage, replacing income until retirement. You don't need a lot of money to protect your tomorrow, today.

Features worth asking about

Conversion option. Lets you switch to permanent coverage later without new health questions, within the policy's rules.
Living benefit riders. On some policies, may let you access part of the benefit early for a qualifying illness. Availability varies.
Return of premium. Costs more; returns premiums if you outlive the term, on policies that offer it.

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Related free tools

FAST calculatorSee where money leaks each month and what you could redirect toward protecting your family.See what you may qualify forAnswer a few health questions and see which options are likely to fit.Mortgage coverage calculatorStart with your loan balance and monthly payment.

Common follow-up questions

Is the death benefit taxable?

Life insurance death benefits are generally paid income-tax free to beneficiaries. Ask a tax professional about your situation.

Does term life build cash value?

Generally no. That's why it costs less than permanent coverage.

Can I cancel term life anytime?

Yes, you can usually stop paying and the coverage ends. There's typically no refund on standard term.

Can I have more than one term policy?

Yes. Some families 'ladder' policies of different lengths to match needs that end at different times.

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What is term life insurance and how does it work?