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Term life insurance is generally the most affordable life insurance option and is in place for a set period of time. Term life insurance policy length generally ranges between 10 and 30 years, although some companies offer other options.

Because term life insurance cost is low, it’s possible to purchase a larger amount of coverage, which will be in place during the years when you need it most, such as when you have young children.

Below, we’ll discuss how to find the best term life insurance policy for your needs, as well as how to find the best rates for term life insurance policies by comparing companies.

KEY TAKEAWAYS
  • Term life insurance provides a death benefit during a specified period of time and expires at the end of the term.
  • Terms are usually between 10 and 20 years in length.
  • Term life insurance is the most affordable life insurance option, and can be purchased for less than $10 a month.

What is term life insurance?

Term life insurance is a basic life insurance policy that pays a guaranteed death benefit to your beneficiaries if you die during the chosen term. Terms are usually between 10 and 30 years, but some companies may offer shorter or longer terms.

Because of the limits of the term, life insurance companies charge lower rates for term life than they do for a permanent policy like whole life insurance  or universal life insurance. The risk that you will die during the set term is lower.

Types of term life insurance

There are several variations of term life insurance, all with slightly different underwriting or coverage features.

  • Guaranteed level term life insurance (The premium and death benefit do not change)
  • Return of premium term life insurance (If you don’t die during the term, premiums are returned to you)
  • Annual renewable term life insurance (Renews every year, rates will increase)
  • Decreasing term life insurance (Death benefit and premiums reduce over time)
  • Modified term life insurance (Premiums change over time, but death benefit doesn’t)

In addition, a term life insurance policy may be either fully underwritten (you undergo a medical exam) or simplified issue, also known as no medical exam term life. 

How much does term life insurance cost?

The average term life insurance cost is $528 for a 30-year-old non-smoker male with death benefits of $250,000 and 30 year policy period.

It’s generally more affordable than people think.

"Consistently, consumers have told our researchers they believe they can't afford life insurance, but when we dug deeper, our research showed that many overestimate the cost by as much as 300%," says Robert Kerzner, LIMRA's president and chief executive officer.

Many factors go into the cost of term life insurance, including age, gender and health status. Here are the average annual premiums for term life death benefits of $250,000 for people classified as "regular" health.

Average Annual Premiums for Term Life death benefit of $250,000

Average Term Life Insurance Costs
Health profile and term lengthAge 30Age 40Age 50Age 60
Female non-smoker 10-year term$223$306$573$1,184
Female non-smoker 20-year term$314$477$955$2,310
Female non-smoker 30-year term$431$695$1,537$7,300*
Female smoker 10-year term$439$692$1,482$3,072
Female smoker 20-year term$669$1,185$2,386$5,219
Female smoker 30-year term$915$1,655$3,695$13,030*
Male non-smoker 10-year term$263$358$735$1,716
Male non-smoker 20-year term$368$565$1,226$3,128
Male non-smoker 30-year term$528$874$2,023$7,300*
Male smoker 10-year term$553$866$1,970$4,424
Male smoker 20-year term$826$1,487$3,176$7,100
Male smoker 30-year term$1,166$2,140$4,470$13,030*

*Limited quotes available. Data source: Compulife Quotation System as of August 2020.

Comparing term, whole, and universal life insurance

If you’re trying to decide between term and whole life insurance (or universal life) take a look at the quick comparison chart below.

TermWholeUniversal
PremiumsLevelLevelFlexible
Death benefitLevel/guaranteedLevel/GuaranteedFlexible
Length of coverageExpires at end of termEntire lifeEntire life
Cash valueNoYesYes
Medical examSometimesSometimesYes
CostLowerHigherHigher

It’s important to note that permanent life insurance, especially universal life, should be discussed with an insurance expert and a financial advisor before you make a purchase, to be sure it’s right for you.

Benefits of term life insurance

Here are some reasons why term life insurance might be a good fit for families on a budget.

  • Less expensive. Term life insurance offers extensive coverage at an affordable rate.
  • Easy to understand. While policies like universal life can be complex, term life is straightforward
  • Flexibility. You choose the term length and death benefit.
  • Death benefits are tax-free. Your beneficiaries won’t be taxed on the death benefit
  • No penalty or cancellation fees. You can cancel your term policy without incurring any fees or penalties.
  • Convertible. You can convert to permanent coverage at the end of the term in most cases.

Of course, there are pros and cons of term life insurance. For most people, the biggest downside is that the coverage expires, and there is no return on the investment. However, like all insurance, term life insurance is peace of mind for the “what if”, and that’s really what you are paying for.

What happens if I outlive my term life policy?

If you outlive your term policy, the coverage will end and you will not receive anything back from the insurance company.

Return-of-premium term life is the only exception to that; however, it’s more expensive than a regular term policy.

The purpose of term life is to provide coverage when it’s most needed and then to expire when you no longer need it. However, if you reach the end of your term and discover that the need is still there, you have the option of converting the policy to a permanent plan.

You will pay higher rates because you are older, but in most cases, you won’t have to take a new medical exam.

What is no medical exam term life insurance?

A medical exam is usually required when applying for a standard term life insurance policy. The exam will check your height, weight, medical history, smoking habits and include a blood and urine test. These tests will look for specific medical problems.

The results may hinder you from getting approved for insurance or you may wind up with much higher rates depending on the outcome. If you have health problems, you might want to consider a "no medical exam" term life insurance policy, known as simplified issue life insurance

These policies require only a few health questions and no medical exam. You will pay a higher premium for a no-exam life insurance policy, so if you are in good health a traditional policy is your best bet.

Who buys term life insurance policies?

Anyone who needs to provide financial protection in the event of their death, and needs that coverage for a specific period of time, can look to term life insurance.

Cameron Ellis, an assistant professor in the Department of Risk, Insurance, & Healthcare Management at the Fox School of Business at Temple University, says that it's a good idea to get life insurance as soon as someone else depends on your income.

"This could be when you and someone else sign a lease together or purchase a car/home. Or it could be whenever you have children. If one spouse is 'stay at home,' I would still recommend they purchase some life insurance. Even though there is no lost income, replacing the lost childcare and domestic duties can be very expensive," Ellis says.

Term life insurance is the simplest type of life insurance to get and it's become even easier to get approved these days.

tip iconTIPCarrie Skogsberg of COUNTRY Financial Life Insurance explains, "Insurance companies are offering term life insurance products today that speed up the underwriting process and may not include a medical exam for policies within a certain benefit amount and for a person under a specific age, say 50 years old."

Term life is a good choice for most people, and is more affordable than permanent life.

How much term life insurance do you need?

When deciding how much life insurance you need, think about:

  • Funeral costs
  • How much it will cost to replace your income
  • The services that would need to be paid for, such as child care
  • Your outstanding debts, such as mortgages, credit card bills and loans
  • Long-term financial commitments, such as paying for your child's college

You can use Insurance.com’s life insurance calculator to figure out how much coverage you should have. The life insurance calculator considers your funeral costs, mortgage, income, debt, education to give you a clear estimate of the ideal amount of life insurance coverage.

Term life insurance riders

Term life policies can include extra features or riders for additional coverage.

Here are some common term life riders:

  • Accidental death. Pays out additional benefits if your death is accidental.
  • Family income benefit. Replaces lost income.
  • Guaranteed insurability. Lets you add coverage to your policy without going through a medical exam later.
  • Long-term care. The rider helps if you need long-term care in a nursing home or home care. 
  • Waiver of premium. Waives your premium if you become totally disabled or you lose your income because of injury or illness.

How to buy term life insurance

When shopping for the best life insurance company, there are a few steps to follow:

  1. Find the top life insurance carriers. You can start your search by checking out Insurance.com’s ranking of the best life insurance companies.
  2. Check financial stability. There are financial stability ratings from agencies such as Moody's, S&P Global, A.M. Best, and Fitch you can review to get an idea of the company’s strength.
  3. Read customer reviews. See what others have to say about their experience with the insurer. 
  4. Compare rates. Once you have narrowed down your choices, get quotes from your top picks and compare rates.

5 ways to save on term life insurance

Termlifesave

Once you've narrowed down your list of best term life insurance companies, your next focus should be on getting the best rate. Here are five ways to save on life insurance:

  • Shop around. The best way to ensure you have the best rate is to compare rates from multiple companies.
  • Don’t overinsure. You might not need as much coverage as you think. Make sure to use a calculator so you don’t overpay.
  • Check with your employer. You might be eligible for a group policy through work, which is usually cheaper.
  • Quit smoking. You’ll qualify for cheaper rates.
  • Improve your health. Losing weight and correcting issues like high cholesterol and high blood pressure can earn you a cheaper rate.
  • Don’t wait to buy. Unless you are trying to improve your health, it doesn’t pay to wait. The younger you buy life insurance, the more you will save.

FAQ's: Term Life Insurance

Is term life insurance worth it?

Like all life insurance, it’s worth it when you need it. But even if you don’t use it, and you hope you won’t have to, it brings peace of mind that is well worth the cost.

How much does term life insurance cost per month?

The monthly cost of term life insurance depends on a wide variety of factors, including your age, health status, the length of the term, and the amount of the death benefit. Get quotes for your particular situation to find out what your rates will be.

What does Term Life Insurance cover?

Terms life insurance covers anything the beneficiary needs or wants. There are no rules regarding how the death benefit can be used. Common uses include:

  • Paying college expenses for children
  • Paying off a mortgage
  • Funeral expenses
  • Debt