Providing for one's family is one of the most basic and important roles an individual will have during their lifetime. While sound investment strategies and responsible financing can help provide a safety net in the case of a spouse's death, financial stability can take years and even decades to attain. A life insurance policy is the best way to provide immediate financial protection in the short-term, providing large amounts of financial coverage at an affordable monthly premium, while also safeguarding a family's financial well being in the long-term.

What is Term Life Insurance?

Term life insurance is a form of life insurance that offers coverage for a fixed rate of time. If an individual dies before the term ends, the insurance company will pay a large sum of money to the deceased individual's family, spouse, or other designated person depending on the terms of the policy. Once the fixed timeframe of coverage ends, the individual or family is no longer covered by the policy. There are several different types of term life insurance policies whose terms and policies can vary slightly from this basic concept.

How Long is a Typical Term Life Insurance Policy?

Term life insurance policies vary greatly in length depending on the needs of the insured individual. Most insurance companies offer policies in increments of 10 years, commonly providing 10, 20, or 30-year policies, with some providing options for additional coverage at 5-year increments for a 35 or 40-year term.

Can Term Life Insurance be Renewed?

Term life insurance policies can be renewed for another term if an individual desires additional coverage. However, depending on the type of term life insurance plan, the monthly premiums could go up significantly since insuring older individuals is more expensive. The basic concept of term life insurance is to provide a cost-effective financial safeguard in the earlier years of an individual's life before they are financially stable, and then once the term expires the individual will hopefully have enough of a cash reserve to alleviate the need for life insurance.

How Does Term Life Insurance Differ from Whole Life Insurance?

Unlike term life insurance which expires after a fixed rate of time, whole life insurance covers an individual for their entire life. However, it is far more costly than term life insurance, with monthly premiums often 5 times and even up to ten times more expensive. Whole life insurance also builds up a cash value, functioning as a long-term investment that can be tapped into at a later point if not used.

What are the Different Types of Term Life Insurance?

There are several different types of term life insurance plans available, although there is no exact number since custom plans are often offered by different companies. Below are some of the main policy types:

• Level - Level term life insurance is the most common form of term life insurance and provides exactly what its name implies - a fixed premium for a fixed period with a specific payout upon death.
• Convertible - Convertible term life insurance allows the policy to be converted from a term life insurance policy into a whole life insurance policy.
• Family Income Benefit - A family income benefit policy allows the payout from the death of an insured individual to be made in a lump sum or regular payments.
• Annual Renewable - Annual renewable policies allow the plan to be renewed every year for the same or a lesser payout. However, the premiums will rise every time the policy is renewed.