Term life insurance offers peace of mind, providing affordable financial protection for your loved ones at a fraction of the cost of permanent policies. This guide simplifies the process, helping you make informed decisions effortlessly.
This guide simplifies the process of finding cheap term life insurance, comparing the best life insurance companies, or determining how much term life insurance you need.
What Is Term Life Insurance?
Term life insurance provides coverage for a set period, typically 10, 15, 20, 25, 30 or even 40 years. If you pass away during the term, the life insurance company pays the death benefit to your beneficiaries. It’s a straightforward way to get the most coverage at the lowest price.
Understanding the available options is key if you’re searching for the best term policy or comparing 10-year vs. 20-year term life insurance.
Key Features of Term Life
- Fixed term lengths from 1-40 years
- Level premiums during the term
- Guaranteed level death benefit
- Conversion privilege to permanent life insurance
- Life insurance riders to customize coverage
Term is ideal for families and individuals needing coverage for mortgages, education expenses, or income replacement. Due to lower premiums than permanent coverage, it’s a great option for high-risk life insurance cases.
How Does Term Life Insurance Work?
The process begins by requesting a life insurance quote, answering underwriting questions, and reviewing coverage options. You’ll choose the best life insurance company, complete an application, and decide on coverage amount and term length.
Beneficiaries, life insurance riders, and settlement options are also selected.
Many insurers now offer no-medical-exam term life insurance for $500k – $3 million. After underwriting approval, your premium and death benefit remain locked in for the term length chosen.
If you’re concerned about the life insurance underwriting process, a no-exam life insurance policy might be the right solution.
Our Life Insurance 101 guide covers the above in greater detail.
Why Choose Term Life Insurance?
Term life insurance has advantages and disadvantages compared to whole life insurance and universal life insurance. While term is the cheapest option, it lacks cash value accumulation or permanent coverage.
Advantages:
- Affordability – Maximum coverage at minimal cost.
- Flexibility – Tailor term lengths to your needs.
- Simplicity – Easy to understand and manage.
- Customizable – Add riders for personalized coverage.
Disadvantages:
- Expiration Risk – You may outlive the policy term.
- No Cash Value – No returns when the term ends.
- Renewal Costs – Premiums rise significantly after the term expires.
Evaluate your financial obligations to select the right policy.
What Happens At The End of The Term?
Policies are often renewable to age 90-95, but premiums rise substantially. If your term life insurance expires, you have several options: renew the policy, convert to permanent life insurance, or shop for a new one. Understanding term life renewal rates can help you make the best decision.
Here’s an example of what happens at the top term life companies when the level term ends.
| Company | Death Benefit | Premium |
|---|---|---|
| Banner Life | Decreases | Increases |
| Corebridge Financial | Decreases | Increases |
| John Hancock | Stays the same | Increases |
| Lincoln Life Elements | Decreases | Increases |
| Mass Mutual | Stays the same | Increases |
| Nationwide | Stays the same | Increases |
| Pacific Life | Stays the same | Increases |
| Protective Life | Stays the same | Increases |
| Prudential | Stays the same | Increases |
| United of Omaha | Stays the same | Increases |
Most policyholders choose to replace or convert the policy to avoid the high renewal costs.
How To Choose The Right Term Length
Matching your policy to your financial needs is crucial when deciding on short-term needs for 10-15 years or a 30-year life insurance policy for long-term security.
- Income Replacement – Cover 10-25 years of your salary.
- Mortgage Protection – Align the term length with your loan duration.
- Young Children – Provide coverage until they reach adulthood.
- Retirement Planning – Extend coverage to your retirement age.
Speaking of retirement, term life is sometimes used for pension maximization strategies where you take the maximum benefit and provide life insurance to replace the survivor benefit.
According to life insurance statistics, the 20-year policy is the most popular, but choose carefully, as policies are rarely kept beyond the level term period.
Life insurers offer many durations, from 1 to 40 years. One life insurer, AIG – Corebridge Financial, offers 16 – 30 years in one-year increments.
Bottom line – Choose your policy carefully because you won’t keep the policy after the level period.
Term Lengths Available
A variety of term lengths are offered, but availability varies by company.
| Term Length | Highlights |
|---|---|
| 1-Year | Annual Renewable Term; premiums increase yearly. |
| 5-Year | Offered by very few companies; more expensive than a 10-year term. |
| 10-Year | Ideal for short-term needs like SBA loans. |
| 15-Year | Great for covering mortgages and education expenses. |
| 20-Year | The most popular and competitively priced term length in the market. |
| 25-Year | Limited availability; higher premiums. |
| 30-Year | Popular for long-term obligations like mortgages. |
| 35-Year | Limited companies available; pricey. |
| 40-Year | Available with two companies; expensive coverage |
| Alternative | One company offers term lengths between 16-30 years in one year increments |
Additional highlights:
When 40-year term life insurance became available with Banner Life and Protective Life, there was a lot of interest. The problem with it is the price, as it just may not be worth it. Here are some examples comparing 30—to 40-year term life policies.
| Age/Gender | 30-Year Term | 40-Year Term | % Increase |
|---|---|---|---|
| Female (30) | $24.53 | $38.48 | 56.8% |
| Male (30) | $29.12 | $53.26 | 82.9% |
| Female (35) | $28.59 | $51.83 | 81.3% |
| Male (35) | $34.06 | $69.73 | 104.7% |
| Female (40) | $38.89 | $89.86 | 131.1% |
| Male (40) | $48.93 | $112.45 | 129.8% |
Bottom line – a 40-year term makes sense for very few people and I believe that’s why no other companies offer this term length.
Term Life Insurance Consumer Guides
Many insurers provide detailed consumer guides:
- Corebridge Financial
- Costco
- John Hancock
- Pacific Life
- Protective Life
- Prudential
- Transamerica
Convertible Term Life Insurance
A term life insurance policy may be converted to whole life insurance or universal life insurance with no additional medical underwriting. If you’re worried about your life insurance expiring or want to ensure lifelong coverage, a term-to-permanent conversion allows you to keep protection.
Pros of Conversion
- No medical exams or underwriting is required.
- Retains your original health rating.
- Offers lifetime coverage and potential policy flexibility.
- Partial conversions are possible, allowing customization.
Cons of Conversion
- Higher premiums due to permanent coverage and current age.
- Limited conversion options with older policies.
The conversion process is simple – Review the conversion illustrations (we’ll prepare them for you) and complete a simple application. The timeframe for completion is 1-2 weeks.
Term vs Whole Life Insurance
Whole life insurance is a permanent life insurance policy that offers lifetime protection, cash value accumulation, and dividends with some policies. Whole life insurance may be used for estate planning or to help supplement retirement income.
Term vs Universal Life Insurance
Universal life insurance is permanent life insurance designed to provide guaranteed death benefits until age 120 and cash value accumulation via fixed interest rates or interest tied to stock index performance.
Pricing for universal life insurance policies tends to be more competitive than that of whole life insurance, and these policies may provide loans to supplement retirement income.
Term vs Other Types of Life Insurance
You may encounter other types of coverage and wonder how your life insurance policy compares to other options available. Should you choose group life insurance vs. individual life insurance? Is term life insurance better than whole life insurance?
Understanding the differences will help you make a better decision.
Group Life vs. Term
Group life insurance is a benefit commonly provided by employers, often including a base policy of around $50,000 at no cost to you. Employees typically have the option to purchase additional coverage through the group plan, often at competitive rates.
With group life insurance, the base amount given to employees for free is great and should be accepted. Otherwise, you should buy your life insurance outside of work.
Membership Life Insurance
Some organizations offer life insurance programs to their members. The policies may offer some benefits and discounts that make the coverage attractive.
Examples include the AICPA Term Life Insurance program and the Costco life insurance offer.
Mortgage Life Insurance or Term Life
When comparing term vs. mortgage policies, the premiums for both policies remain level for the term. The difference concerns the coverage amount and how it gets paid out. Mortgage life insurance coverage decreases yearly with your mortgage, but your premium remains level, and the death benefit gets paid directly to the mortgage company if you die.
Term Life Insurance vs. ROP
If you would like to get money back from your term life, an ROP – Return of Premium policy may be a good fit. With the ROP, the life insurer refunds all premiums you pay at the end. ROP may sound like a good deal (and it can sometimes be), but remember that your ROP will be more expensive.
FAQ
Ready to secure your financial future? Compare term life insurance quotes online, explore cheap term life insurance options, and find the best term life insurance companies for your needs. Get started today!
Final Thoughts
Term life insurance is a simple, cost-effective way to protect your family’s financial future. Its affordability, flexibility, and ease of understanding make it a great choice for individuals and families with temporary coverage needs.
Take the time to evaluate your obligations and explore optional riders to enhance your policy. Whether you need a short-term safety net or a stepping stone to permanent coverage, term life offers the peace of mind you deserve.
We’re RiskQuoter – located in Lakewood Ranch, Florida and available nationwide.
