A smiling couple with their two kids in a park | Term life insurance information

Term life insurance is the simplest and cheapest type of life insurance. For many of our clients, it’s the easiest and most affordable way to get the amount of coverage they need without paying too much.

Here’s a quick list of features to note about term life insurance:

☑️ Most affordable type of life insurance coverage
☑️ Choose a convenient amount of coverage, from 1-35 years
☑️ Available with no medical exam
☑️ Options to renew or convert to a permanent policy
☑️ Fixed payment amount for your entire term

If you’re wondering how to buy term life insurance online, we can help. The fastest way to get the best rates for guaranteed term life insurance is to use our online quoter. You can choose from the most affordable rates and plans available, and even start the application process online.

Call 800-823-4852 for Term Life Insurance Quotes

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If you prefer to do your homework before you buy, we’ve compiled more information and buying tips below.

Jump to a section:

How Does Term Life Insurance Work?
Is Term Life Insurance Right for Me?
Who Should Buy Term Life Insurance?
How Long a Term Should I Get?
Is My Term Guaranteed?
What Happens at the End of My Term Insurance Policy?
What Kinds of Term Policies Are There?
What Is Return of Premium?
How Are Term Life Rates Determined?
What Can My Family Do with the Life Insurance Money?


How Does Term Life Insurance Work?

It’s a pretty straightforward process. When you shop for a policy online, you’ll request quotes based on a particular term – the length of time you want to be insured. Insurance companies offer terms ranging from very short (1 year) to pretty long (40 years).

You’ll also have to decide whether you want to take a medical exam. If you do, the rates are likely to be lower. But if you’d rather not, that’s okay, too. Since the pandemic, more insurance companies than ever have created no medical exam life insurance policies. Keep in mind, these usually cost a little more than fully underwritten policies with a medical exam.

Once you’ve applied and completed either a medical exam or a health questionnaire for a non-med policy, the life insurance company will use that information to offer you a rate (price for your policy). You can accept that rate or decline their offer. However, if you decline it, you’ll have to start the process over with a different insurance company.

Once you accept the insurance company’s offer, all you do is start making payments to put that level term policy into effect. It remains active as long as you keep making payments. In a traditional term life insurance policy, the death benefit and your payment amounts are both fixed at the time you bought the policy. They will never increase during the length of your term. At the end of your policy’s term, your payments and your coverage both cease. However, you may have the opportunity to renew your term policy.

If you pass away during your policy’s term, the insurance company will pay the face value (dollar amount) of your policy. That death benefit goes to the beneficiary or beneficiaries you named when you bought the policy.

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Is Term Life Insurance Right for Me?

That depends on your budget and the coverage you need.

Term life is the best-known type of life insurance. It's been keeping families financially secure for more than 200 years. An insurance company in Charleston, South Carolina started selling policies in 1760, well before the American Revolution. Today, guaranteed term life insurance is one of the most popular and most affordable varieties on the market. In 2019, 41% of new life insurance policies were term life. That’s 4.1 million policies purchased that year alone! (ACLI.com)

Because it has a limited coverage period, it's less expensive than policies that cover you for the rest of your life (called permanent life insurance). This is one of the biggest advantages of term life insurance. If you’re working with a limited budget, term life is definitely going to be your most affordable option.

The benefit? You know exactly what your monthly payments will be, when they're due, and how much your family will receive if you pass away during the term. That amount will never change—it's called a fixed death benefit.

Your payments might be monthly, quarterly, semi-annually, or yearly, depending on the life insurance company you choose. You can cancel your policy at any time, but if you do, the insurer doesn't have to pay anything if you pass away.

On the other hand, if you’re looking for coverage that never expires, term life can’t provide that. You’d be better off shopping for permanent coverage – whole life and universal life are two common types. Term life also doesn’t build the kind of equity that permanent policies provide, called “cash value.” Those features are only available on whole life or universal life policies.

Not sure which type is best for you? Give us a call and let’s talk through your life insurance options.

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Who Should Buy Term Life Insurance?

Here’s the short and easy answer: if someone depends on you financially, you should get insurance.

We just don’t know what the future holds. If you have financial obligations to children, elderly parents, or other family members, you should have something in place to help them if anything happened to you. Life insurance provides the peace of mind that comes with knowing that if you’re no longer there to provide for them, they will still be taken care of financially.

Our clients usually buy term life insurance to:

  • Cover debts or liabilities (e.g., a mortgage, funeral costs)
  • Maintain a spouse's standard of living
  • Provide for their kids until they’re of age
  • Pay for schooling or daycare for their kids
  • Fund a buy-sell agreement for a business
  • Protect a business from a key employee's death

If you have young children, debts and liabilities, own a business, or want to leave behind a legacy, term life insurance may be right for you.

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How Long a Term Should I Get?

When you buy term life insurance, it's best to balance between safety and cost. With that in mind, it's much safer to buy a policy with a long term rather than to buy a series of short-term policies.

Why is a longer term safer?

When you buy a policy, your rate is locked in – and that rate is entirely based on the health class the insurance company assigned you. What happens if your health gets worse…and you decide to renew your policy? It’s going to cost more than if you’d bought a longer term to begin with. Once you lock in that rate, you can't be charged more during the entire term of your policy.

Here's an example:
Let’s say your insurance company put you in the “Preferred” health class when you bought your policy, which kept your rate low. Then, let’s say you were diagnosed with cancer in the first year of a 30-year policy. Because your term is so long, you'll keep paying those low "Preferred" rates for the next 29 years.

On the other hand, if this scenario happened during year one of a 5-year policy, you might not even be able to get a new policy after that five-year term ends. If you did, you'd pay much higher premiums.

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Is My Term Guaranteed?

Yes. The term period is the number of years you’ll have insurance protection at a guaranteed premium rate. You can buy term life insurance with guaranteed rates for 1, 5, 10, 15, 20, 25, 30, or 35 years, depending on your needs. Here are few examples of a term period for guaranteed term life insurance plans.

☑️ Example 1

John and Jane Doe have at least 10 years left on their home mortgage and 2 kids (ages 7 and 9). Most likely, they would buy a 15-year term life policy. Why? Because a 15-year term would cover them until the mortgage is paid off and the youngest of their children is no longer a dependent.

☑️ Example 2

John Smith is a business owner who has a 10-year business loan. Most likely, he would buy term life insurance protection for 10 years. This way, he’d be covered during the period he would be in debt.

The most common term periods of death benefit protection are 10, 15, 20, and 30 year plans. As a result, term life rates for these periods are also the most competitively priced.

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What Happens at the End of My Term Insurance Policy?

When your term ends, so does your policy.

If you want your policy to continue, you can do that. Every guaranteed term life insurance contract will have a rate spelled out that you can pay to continue your policy once the initial term expires. Be sure to read the fine print! Because in almost all cases, that rate will be more – sometimes significantly more – than you paid when the policy began.

Ready to get started?

At this point, you have several life insurance options:

☑️ Pay the higher premiums as spelled out in your contract to continue coverage.

This might be a good solution if you’re in poor health, which makes it more difficult to find an affordable replacement policy. Continuing coverage is usually only allowed until you reach a certain age (in many cases, it’s age 90).

☑️ Convert to a permanent policy.

Your insurance company can replace your term life policy with a permanent policy that covers you for the rest of your life. Your rates might only be guaranteed for a certain period (such as 10 years). Your term policy might also have a specific window for conversion, such as the first 5 years of your term.

☑️ Opt for a renewable policy.

Renewable life insurance can be replaced with a policy of the same type, face amount, and health class. You might have an increase in term life rates to reflect your age.

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What Kinds of Term Insurance Policies Are There?

☑️ Annual renewable term insurance (ART)

The term is just one year long, but you can renew your policy upon its expiration. Your rate will probably increase each year you take this option.

☑️ Adjustable term life insurance

Lets you change the size of the death benefit while coverage is in force.

☑️ Participating term insurance

Term life insurance which provides dividends to the policyholder.

☑️ Renewable term insurance

You can renew your term life insurance policy when it expires.

☑️ Return of premium

When the term ends, your premiums are all refunded to you.

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What Is Return of Premium?

This type of policy offers a partial or complete return of the premiums you’ve paid if you’re still alive at the end of your term. If you pass away during the term, the insurance company pays the full death benefit to your beneficiaries without a return of premium. You may also see these policies referred to as “zero premium life insurance.”

Return of premium policies usually cost a little more than traditional term. When you make a payment, that little bit of extra cost is set aside in a savings vehicle designed to accumulate to an amount of money equal to the amount of premium you’ve paid throughout the term. That amount is what the life insurance company returns to you as a refund of premium. This feature is virtually identical to the cash value feature on most permanent life insurance products, like whole or universal life insurance.

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How Are Term Life Rates Determined?

Your term life rates will depend on a number of factors involving your health, lifestyle, and job.

Insurance companies base their rates on what they call a “rate class.” To assign you a rate class, they do one of two things:

  • provide a medical exam for you and use data gathered from that exam to evaluate your life expectancy
  • use digital sources like medical records, prescription records, and DMV records to evaluate your life expectancy

The insurer will look at the results of either your exam or their data collection, as well as any attending physician statements (APS) they request from your doctor.

All term life rates are based on the life expectancy of the insured person. If you have a longer life expectancy, you’ll pay less for your amount of coverage. Other factors that can affect your rate include hazardous activities or work, prior health history, and family health history. The good news is that once an insurer offers you a rate, it will be locked in for the entire term.

When you get a term life quote, you’ll be asked for a few key pieces of information (age, sex) that can give you a ballpark rate figure. Keep in mind that doesn’t necessarily represent actual term life rates. As long as you answer the questions honestly, an affordable term life insurance quote will most likely result in an affordable policy once underwriting is complete.

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Call 800-823-4852 for Term Life Insurance Quotes

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What Can My Family Do with the Life Insurance Money?

Anything! Life insurance money is used for a lot more than covering the cost of a funeral or burial expenses. Many families buy it specifically for these reasons:

  • Pay for child care
  • Fund higher education
  • Cover debts or liabilities, like a mortgage
  • Fund a buy-sell agreement for a business
  • Protect against the loss of a key employee
  • Replace an income stream

There are no restrictions on what your loved ones can do with that money. When you buy term life insurance, you’re buying a result: a payout for your loved ones when you pass away. In most cases, that cash is also income-tax-free, so you don’t have to worry about any tax implications for the future.

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Call 800-823-4852 for Term Life Insurance Quotes

We'll find you the best term life insurance rates


What's Next?

  • Start shopping for guaranteed term life insurance right now – use our quoter to compare rates online.
  • Get help by calling or emailing us for personalized advice.
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