What is Term Life Insurance?

As the name suggests, term life insurance is a form of insurance that provides death protection for a certain period of time, which is referred to as the term. If the holder of the insurance policy dies before the term has ended, his or her family is eligible to receive the compensation agreed upon as part of the policy.

Term Life Insurance (Flickr)

Term life insurance is the simplest form of death protection, designed to provide temporary coverage for those on a limited budget. Such an insurance policy is also popular for parents during the child-raising years so that the children are better provided for in the case of an emergency and for those who need life insurance coverage to pay off a loan. Term life insurance can be purchased in large amounts with a smaller premium than can be found in other similar policies.

Most insurance companies offer term life insurance in increments of five years, allowing an individual to seek life insurance for anywhere from five years to upwards of thirty years. The premium on such an insurance policy tends to be more expensive as the policy holder ages, which means that pursuing term life insurance for someone in their seventies is much more expensive than acquiring life insurance for a young parent.

Premiums on term life insurance are generally adjustable by the insurance company depending on a variety of factors, but they can never go above the maximum premium stated in the policy. Term life insurance policies can generally be renewed upon expiration or converted to a permanent life insurance policy depending on the wishes of the individual.