What Is Term Life Insurance?

So you might wonder, what is term life insurance? Term life insurance policies cover you for a specified period of time (term) of one or more years. Term life insurance policies pay a death benefit only if you die in that term. Term life insurance generally offers the largest insurance protection for your premium dollar. A term life insurance policy generally does not build up cash value.

When many people ask, what is term life insurance, they wonder if such term life insurance policies are renewable. You can renew most term life insurance policies for one or more terms even if your health has changed. Each time you renew the term life insurance policy for a new term, premiums may be higher. Ask your life insurance agent what the premiums will be if you continue to renew the term life insurance policy. Also ask if you will lose the right to renew the term life insurance policy at a certain age. Some term life insurance policies do not allow you to continue to renew your policy past age 95. For a higher premium, some companies will give you the right to keep the term life insurance policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue term life insurance coverage, and premiums may increase.

You may be able to trade many term life insurance policies for a cash value life insurance policy during a conversion period – even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

So, now, when you're asked "what is term life insurance?", you can perhaps answer and understand its basic components.