Term life insurance

Term life insurance is the most affordable and straightforward type of life insurance. Find out how to get financial protection without breaking the bank.

Nupur GambhirAmanda Shih author photo

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Nupur Gambhir

Nupur Gambhir

Life Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius and licensed Life, Health, and Disability agent in New York.

&

Amanda Shih

Amanda Shih

Editor & Licensed Insurance Expert

Amanda Shih is an insurance editor and licensed Life, Health, and Disability agent at Policygenius in New York City. Her work has appeared in Slate, Lifehacker, Jetty, and J.D. Power.

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Expert reviewed

This article has been reviewed by a licensed Policygenius expert to ensure that sources, statistics, and claims meet our standard for accurate and unbiased advice.

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by

Patrick Hanzel, CFP®

Patrick Hanzel, CFP®

CERTIFIED FINANCIAL PLANNER™ & Advanced Planning Team Lead

Patrick Hanzel is a CERTIFIED FINANCIAL PLANNER™ and Advanced Planning Team Lead at Policygenius. He has eight years of insurance and financial industry experience and previously worked at Northwestern Mutual as an advisor and associate. His expertise has been featured on Lifehacker, Consumer Affairs, Authority Magazine, Thrive Global, and Fatherly.

Updated September 22, 2021|3 min read

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A term life insurance policy delivers affordable financial protection to your family and gives you peace of mind. Unlike permanent life insurance, which lasts for the rest of your life and comes with a cash value, term life is easy to manage and cost-effective. Because of low pricing and simplicity, a term policy is the best kind of life insurance for most people.  If you’re ready to shop for life insurance, you don’t have to do it alone. We can help you find the most robust coverage for a competitive price.

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What is term life insurance?

Term life insurance works by guaranteeing financial protection for your family over a specific period — the term — before expiring. If you die before the term ends, your beneficiary receives a death benefit, a tax-free lump sum of money that can be used to cover funeral costs, bills, or any other expenses.

Terms usually last from 10 to 30 years and you pay a monthly or annual premium, which is determined using your policy details and your health and demographic information. This is different from permanent life insurance, which lasts for the rest of your life and comes with a cash value

People often choose term over whole life insurance because it’s affordable and straightforward. You can choose your term length and coverage amount so you don’t pay for more financial protection than you need. And unless you have a unique financial situation or lifelong dependents, going with term life insurance will make more sense. 

Term life insurance policy features
Policy duration10-30 years
Average cost$20-30/month
Guaranteed death benefit?Yes
Cash value?No

Methodology: Average cost calculated based on rates for non-smoking males and females between 20 and 40 years old in Ohio, in a Preferred rate class, with a 20-year, $500,000 term life insurance policy. Life insurance averages are based on a composite of policies offered by 11 carriers through the Policygenius marketplace. Individual rates may vary depending on age, gender, health profile, and other eligibility criteria. Rate illustration valid as of 1/11/2021.

How much does term life insurance cost?

Life insurance quotes are determined by your age, health history, hobbies (risky activities can cost you), coverage amount, and term length. If you add riders to your policy, that will also impact how much you pay.

Average monthly premiums for a 20-year term life insurance policy

AgeSex$250,000$500,000$1,000,000
25Male$17.30$27.18$45.12
Female$14.35$21.26$34.49
35Male$18.96$30.68$52.34
Female$16.70$25.70$43.10
45Male$35.69$61.07$114.11
Female$28.75$47.81$86.57
55Male$85.29$152.76$288.99
Female$61.11$108.97$207.68

Methodology: Average monthly life insurance premium for each sample customer profile (age, gender) and policy type (term, coverage amount) as of September 21, 2021. Monthly averages are based on 10 products available through Policygenius for the indicated profile: AIG, Banner Life, Brighthouse, Lincoln Financial, Mutual of Omaha, Pacific Life, Protective, Prudential, SBLI and TransAmerica. Rates for those products may vary by state, and not all 10 products are available in all states. Individual rates may vary, depending on age, gender, state, health profile, and other eligibility criteria.

→ Learn more about term life insurance costs

How much insurance do you need?

When deciding how much term life insurance you need, you should factor in outstanding debts, future costs, dependents, and end-of-life expenses. Your policy should last as long as your longest debt (such as a mortgage) and should cover any remaining costs when you subtract your debts from your existing assets.

→ Learn more about how much life insurance you need

Types of term life insurance

While term is the most straightforward type of life insurance and the right one for most people, there are some variations of term life that might be a better fit for your needs. These include:

Term life insurance vs. whole life insurance

Most insurance shoppers will ultimately decide between buying term life insurance or whole life insurance.

Here’s a quick comparison guide:

FeaturesTerm life insuranceWhole life insurance
Duration1-30 yearsLife
Cost$20-30/month5-15 times more than term
Guaranteed death benefit?YesYes
Guaranteed cash value?NoYes
How cash value growsN/AEarns interest at a predetermined fixed rate
PremiumsCan increase periodically or stay level for the policy durationLevel
NotesNo risk of losing coverage, but no cash value when term endsNo risk compared to other permanent types, but you may find better investment options elsewhere

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Does term life insurance expire?

One of the benefits of term life insurance is that the policy expires at the end of the term, allowing you to reassess your needs. You might decide you need less coverage, or no coverage at all. When your policy is ending, you can:

  • Convert your term policy into a permanent policy

  • Keep your current policy at a higher premium

  • Buy a new policy

  • Let the policy expire

Which option you choose depends on your financial obligations. If you’re still saving for retirement, paying off a mortgage, or raising children, it may make sense to keep your current policy at a higher cost or shop for a new one. Once you accomplish your financial goals and/or no longer have dependents, you probably don’t need a policy anymore.  

If you outlive your policy’s term and let the policy expire, you won’t receive a refund of the premiums you’ve paid into it.

How to buy term life insurance

After working with an agent to find the right life insurance company, type of policy, coverage amount, and term length, you'll go through the underwriting process, so an insurer can evaluate your background and determine your health classification, which sets your life insurance premiums. You won’t officially have coverage until you sign your policy documents and pay your first premium.

→ Check out our full guide on buying life insurance here

How to find the best term life insurance company

The best term life insurance company for you depends on your specific situation and we’re here to help you every step of the way.

Policygenius carefully assesses the top life insurance companies to determine where they stand on all of the above. We have dozens of unbiased reviews and ratings, along with expert advice from licensed agents who don’t work on commission.

→ Learn more about the best term life insurance companies

Frequently asked questions

How does term life insurance work?

Term policies last for a set period (usually 10-30 years) and pay out a death benefit to your beneficiaries if you die during that time.

What happens if you outlive term life insurance?

If you outlive your term policy, you can either let it expire, buy a new policy, renew at a higher premium, or convert it into a whole life policy. You will not receive a refund of premiums you’ve paid.

How much term life insurance do I need?

Your policy should offer coverage at least 10-15 times your income and enough to cover your largest debt. You should also factor in future expenses, like childcare or a mortgage.

How long should my term life insurance last?

Your term should be at least as long as your longest debt (e.g., your mortgage), and last as long as you anticipate having dependents.

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