Term insurance is a type of life insurance policy that provides coverage for a certain period of time or a specified "term" of years. If the insured dies during the time period specified in the policy and the policy is active, or in force, a death benefit will be paid. Term insurance is initially
Because term life insurance is a pure death benefit, its primary use is to provide coverage of financial responsibilities for the insured or his or her beneficiaries. Upon renewal, term life insurance premiums increase with age, which may make new premiums cost-prohibitive. In fact, renewal term life premiums may be more expensive than permanent life insurance premiums would have been at the issue of the original term life policy. Term life insurance is not used for estate planning or charitable-giving purposes. All premiums cover the cost of underwriting insurance. As a result, term life premiums are typically lower than permanent life insurance premiums. The basis for term life premiums is on a person’s age, health, and life expectancy, which is set by the insurer.
