Popular Types of Life Insurance

Types of Life Insurance

Term Life Insurance

Whole Life Insurance

No medical exam life insurance

Term life insurance

Term life insurance is the most affordable and straightforward option to financially protect your loved ones. Here’s how to find the best policy at the best price.

Life insurance offers your family financial protection if you die and are no longer there to provide for them. A term life insurance policy will provide you with the best possible coverage at the best possible price.

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.

KEY TAKEAWAYS

  • Term life insurance lasts for a defined period (the “term”) and pays a lump sum to your loved ones if you die during the term

  • Terms usually last 10-30 years and you can purchase add-ons to customize your coverage

  • If you outlive your policy, you do not receive a refund of premiums you’ve already paid

  • A term policy is right for most people because it’s affordable and easy to manage

What is term life insurance?

A life insurance policy mainly functions as an income replacement for your family in the event of your death. Term life insurance works by guaranteeing this 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 for funeral costs, to pay bills, or for any other purpose.

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, to keep the policy active. Once the term is up, the policy expires.

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, who qualify for a Preferred rate class, obtaining a 20-year, $500,000 term life insurance policy. Life insurance averages are based on a composite of policies offered by 11 carriers that offer policies through the Policygenius marketplace. Individual rates will vary as specific circumstances will affect each customer’s rate. Rate illustration valid as of 1/11/2021.

Who should get term life insurance?

If your family or any loved ones rely on you financially or would become responsible for your debts when you die, you should have a life insurance policy. Term life insurance is the best way to get covered unless you have a unique financial situation or lifelong dependents, in which case a permanent policy might be more suitable.

It’s important to buy term life insurance if you’re approaching a major milestone like marriage or a pregnancy or you are taking on a large debt, like a mortgage. As you get older and have fewer dependents and debts, you may need less insurance.

How much does term life insurance cost?

Since term life insurance protects your family for a set period, rather than your entire life, term life premiums are more affordable than permanent policy premiums.

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

AGESEX$250,000$500,000$750,000$1,000,000$2,000,000
25Male$16.68$26.74$36.98$44.69$83.67
Female$13.83$20.86$28.22$34.06$62.40
35Male$17.82$29.09$40.42$50.13$94.56
Female$15.68$24.48$33.58$41.27$76.83
45Male$33.41$59.37$85.84$110.11$214.52
Female$26.92$46.37$66.35$83.40$161.10
55Male$80.87$151.19$222.06$281.12$556.73
Female$57.40$105.77$154.80$199.74$393.98

Methodology: Rates are calculated for male and female non-smokers in Ohio, who qualify for a Preferred rate class, obtaining a 20-year term life insurance policy. Life insurance averages are based on a composite of policies from 11 carriers that offer policies through the Policygenius marketplace. Individual rates will vary as specific circumstances will affect each customer's rate. Rate illustration valid as of 1/11/2021.

The typical term policy is a level term life insurance policy, which means the premium stays the same as long as your policy is active. In general, life insurance quotes are determined by:

  • Health — People with health issues or with a family history of medical conditions are charged more.

  • Age — Older applicants pay more than younger shoppers. Life insurance costs increase by an average of 4.5-9% every year you age.

  • Risky activities — Dangerous jobs and hobbies make you riskier to insure, so you’ll pay more.

  • Coverage amount — The larger the death benefit amount, the more you’ll pay for the policy.

  • Term length — The longer the policy lasts, the more expensive it’ll be.

  • Riders — Adding certain riders to customize a policy may make it more expensive.

Learn more about term life insurance costs.

Benefits of term life insurance

In addition to its affordability, term life insurance offers flexibility that you can’t find in permanent life insurance. Eventually, you’ll ideally save enough money to be able to support your loved ones and cover end-of-life expenses without the help of an insurance policy, or your dependents will no longer rely on you financially.

With term life insurance, the ability to choose your term length and coverage amount means you pay only for the insurance you need and only for as long as you need it. It’s also possible to purchase multiple term life policies, so you can even keep separate insurance policies if, for example, you need a 30-year policy to protect your family and a 10-year policy to protect against a business loan.

And, because term life insurance doesn’t come with an additional investment-like component like permanent life insurance does, term life provides the most important function of life insurance — financial protection — without additional, complex features to manage.

How much term life insurance do you need?

The amount of coverage you want affects your premium costs. You want to keep the policy affordable (there’s no point in buying a policy that you can’t sustain), while still providing enough protection for your family’s financial needs.

When deciding how much term life insurance you need, you should take into account:

  • Outstanding debt, like a mortgage

  • Future education costs, for you or your children

  • Dependents, including children and aging parents

  • End-of-life expenses for yourself

  • Any financial cushion your family might need

In general, your term life insurance 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.

If that sounds like a complicated process, don’t worry. You don’t need to crunch all the numbers by hand. Our free life insurance calculator does the math for you and can provide a tailored recommendation for the term length and coverage amount that would be best for you.

Learn how much life insurance you need.

Compare and buy life insurance

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Types of term life insurance

While term life insurance 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:

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. It could be that you’ll need less coverage, or no coverage at all. When your policy is nearing its end, you’ll have a few options:

  • 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 when your policy’s term ends. If you’re still saving for retirement, paying off a mortgage, or raising children, it makes 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, it may not make sense to continue paying for a policy.

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 unless you purchased return of premium insurance (but we don’t recommend doing that due to its higher cost).

What are term life insurance riders?

Life insurance riders are add-ons to your policy and can make your policy work for you while you are still alive. Some life insurance riders are expensive and may not be worth the additional cost, but others are beneficial and available for free.

Common term life insurance riders include:

  • Term conversion rider — Converts your term life insurance policy into a whole life insurance policy when it expires.

  • Accelerated death benefit rider — Pays out the death benefit if you are diagnosed with a terminal illness and have a life expectancy of 12-24 months.

  • Return of premium rider — Returns some of the premiums you’ve paid if you outlive your life insurance policy's term.

Learn more about life insurance riders.

Term life insurance vs. whole life insurance

Most insurance shoppers will ultimately decide between buying term life insurance or whole life insurance. Because whole life premiums are more expensive, it isn't the right choice for most people. Whole life can be a better fit for individuals with specific circumstances, such as lifelong dependents or a high net worth, but a majority of people will benefit most from a simple term life insurance policy that they can afford.

Here’s a quick comparison guide:

FEATURESTERM LIFE INSURANCEWHOLE LIFE INSURANCE
Duration1-30 yearsLife
Cost$20-30/month5-15x 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

→ Check out our full guide on the difference between term life and whole life.

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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 policy premium.

Check out our full guide on buying life insurance here.

Finding the best term life insurance company

The best term life insurance company for you depends on your specific situation. Most people choose the insurer that offers the best price, which is different for every person.

But what makes a company a good fit also depends on other factors, like which parts of the application process you can do online versus on paper or over the phone and which riders each company offers. You should also consider a company’s customer service record and ratings from trusted third-parties like J.D. Power, A.M. Best, and the Better Business Bureau to see how other customers and financial institutions view a particular provider.

Policygenius carefully reviews the top life insurance companies to determine where they stand on all of the above.

Learn more about the best term life insurance companies.

Finding the best term life insurance policy

Getting the best term life insurance policy requires customizing your coverage to your financial needs. The best policy will offer protection for your longest and largest loan, as well as any additional financial considerations, at a premium that fits your budget.

Your policy should also include any riders that you need. For example, an accidental death & dismemberment rider is an optional policy add-on that covers accidental injury and offers an additional payout for accidental death, which may provide peace of mind if you’re concerned about loss of life or limb due to something other than natural causes.

Although we generally recommend a standard term life insurance policy for most people, another type of term policy might be best for you right now. For example, if you’re a smoker who is trying to quit, buying an annual renewable policy until you qualify for non-smoker premiums could save you money in the long run.

Compare prices

Each life insurance company varies in how they evaluate applications and health conditions, so ultimately, the best way to find the best term life insurance policy and company is to work with an independent broker who does the shopping around for you, like Policygenius. An agent can help you compare quotes and find the life insurance company that offers the best premiums based on your individual circumstances.

If anyone is financially dependent upon you and you don’t have enough money saved to provide for their financial needs when you’re gone, then life insurance should be your top priority. Since term life insurance is the simplest and most inexpensive option, it’s easier to fit it into both your present-day budget and your long-term financial strategy.

Term life insurance FAQ:

How does term life insurance work?

Term life policies last for a set period (usually 10-30 years) and pay 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.

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 adult or minor dependents.

Life Insurance Expert

Nupur Gambhir

Life Insurance Expert

Nupur Gambhir is a life insurance editor at Policygenius in New York City. She has researched and written extensively about life insurance since 2019, with specialties in life insurance companies, policy types, and end-of-life planning. Her writing on insurance and finance has appeared on MSN, The Financial Gym, and end-of-life planning service Cake. Previously, she worked in marketing and business development for travel and tech.

Life Insurance Expert

Amanda Shih

Life Insurance Expert

Amanda Shih is a life insurance editor at Policygenius in New York City. She has a passion for making complex topics relatable and understandable, and has been writing about insurance since 2017 with specialities in life insurance cost and policy types. She's previously written for Jetty and LegalZoom.