Term Life Insurance

What is Term Life Insurance?

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Key Features

Fixed Term – Coverage lasts for a set period (e.g., 20 years).
Death Benefit – Lump-sum payment to beneficiaries if you die during the term.
Level Premiums – Premiums stay the same throughout the term in most policies.
No Cash Value – Unlike whole life or universal life, it’s pure insurance with no savings component.

How It Works

You choose the coverage amount and term length.
You pay regular premiums (monthly or annually).
If you pass away during the term, your beneficiaries receive the death benefit tax-free.
If the term ends and you’re still alive, coverage expires (unless you renew or convert).

Advantages

Low cost – Cheapest way to get a large death benefit.
Simple – Easy to understand and budget for.
Flexible – You choose term length based on needs (e.g., until kids are grown or mortgage is paid).

Drawbacks

Temporary – No coverage after the term ends unless renewed.
No cash value – No savings or investment component.
Renewal after the term ends can be expensive because premiums are based on your new age and health.

Best For

Income replacement for working years.
Covering debts like a mortgage.
Protecting dependents until they become financially independent.

Policy Cost

Average Costs by Age (Preferred Nonsmoker, $500K, 20-Year Term):

20s: ~$214/year (men); ~$177/year (women)
30s: ~$215/year (men); ~$185/year (women)
40s: ~$332/year (men); ~$280/year (women)
50s: ~$815/year (men); ~$640/year (women)

Monthly Costs by Age & Coverage:

$250K policy:

Age 20: Men $22.50/month, Women $21.25/month
Age 40: Men $70/month, Women $52.50/month
Age 60: Men $155/month, Women $132.50/month

$500K policy (via eFinancial averages):

Age 30: Men $14/month, Women $15/month
Age 40: Men $18/month, Women $17/month
Age 50: Men $37/month, Women $41/month

Term Length Impact:
For a healthy 40-year-old:

10 year term: ~$203/year (men), ~$178/year (women)
20 year term: ~$333/year (men), ~$280/year (women)
Extending term length significantly raises premiums

Why Younger Is Better: Best Age to Buy

Buying in your 20s or early 30s secures much lower premiums due to better health and longer life expectancy.
Major life milestones—like marriage, having children, or buying a home—are prompt triggers for obtaining or increasing coverage.
Even in your 40s, 50s, or beyond, getting coverage is still beneficial. Just expect higher costs and potentially stricter underwriting.

Underwriting & Other Pricing Factors

Premiums are influenced by:

Age (younger = lower risk, cheaper rates).
Health status & smoking (smokers and those with health issues pay significantly more).
Gender (statistically, women pay less due to longer life expectancy).
Coverage amount & term length (higher coverage or longer terms cost more).
Term type — Level term has fixed premiums; renewable or decreasing term has different cost structures.
Lifestyle, occupation, and family medical history can lead to rating adjustments.
Underwriting class (e.g., Preferred Plus vs. Standard) significantly impacts premium affordability.

Term Life Insurance Summary

Factor	Summary
Objective	Affordable protection for a set period (10–30 years); income replacement; mortgage protection
Market Trend	Still most popular life insurance type; demand rising among younger families
Key Features	Fixed premiums, pure death benefit, no cash value
How It Works	Pays beneficiaries if insured dies during the term; expires otherwise
Pros	✅ Low cost ✅ High coverage ✅ Simple & flexible
Cons	❌ Expires ❌ No cash value ❌ Renewal is costly
Cost	$200–$800/year (varies by age, gender, term length, coverage)
Best Age	20s–30s: cheapest rates; still worthwhile in 40s–50s
Underwriting	Based on age, health, lifestyle; may need medical exam