Back to all terms

Term Life Insurance

Term life insurance provides financial protection for a specific period of time, known as the term, such as 10, 20, or 30 years. If the insured person dies during that period, the insurer pays a tax-free lump-sum death benefit to the designated beneficiary. This type of insurance is designed to provide affordable coverage for temporary needs, such as replacing income, paying off a mortgage, or supporting dependents until financial independence is achieved.

Premiums for term life insurance remain level throughout the term and are generally lower than those for permanent life insurance. Once the term expires, coverage ends unless the policyholder renews or converts the policy. Most term policies include options for renewal at higher premiums or conversion to permanent life insurance without requiring medical evidence, offering flexibility as financial needs evolve.

Example:

If you purchase a 20-year term life policy for $500,000, your beneficiary will receive the full amount if you pass away during that period. If you outlive the 20 years, the coverage ends unless you renew or convert it.

What to Watch For:

Be aware that premiums increase significantly if you renew at the end of the term due to your age. If you want lifelong protection or a policy that builds cash value, consider converting to a permanent plan before the term expires. Always review the renewal and conversion options in your contract to avoid losing coverage when your needs change.

Related Terms

Misstatement of Age

Misstatement of age occurs when the age of the insured person is recorded incorrectly on an insurance application or policy. Because age is a key factor in determining eligibility, premiums, and benefit amounts, any error - whether accidental or intentional - can affect the terms of coverage. The misstatement may be discovered during underwriting, at the time of a claim, or during a policy review.

Life Insurance

Life insurance is a financial protection product that provides a tax-free lump-sum payment, known as a death benefit, to designated beneficiaries when the insured person dies. It is designed to replace income, pay debts, cover final expenses, or provide financial stability for dependents and loved ones. Life insurance helps ensure that family members can maintain their quality of life and meet ongoing financial obligations even after the loss of the primary earner.

Beneficiary

A beneficiary is the person or entity designated to receive the proceeds or benefits from an insurance policy upon the policyholder’s death or when a covered event occurs. In life insurance, the beneficiary receives the death benefit as a tax-free lump sum. In accidental death and dismemberment (AD&D) insurance, the beneficiary receives payment if the insured person dies as the result of an accident. Beneficiaries can also be designated in certain health or travel plans that include accidental death benefits.

Long-term Disability insurance

Long-term disability (LTD) insurance provides income replacement if you are unable to work for an extended period due to illness or injury. It ensures financial stability by paying a percentage of your regular income, typically between 60 and 85 percent, after you have been disabled for a specific waiting period known as the elimination period. LTD benefits continue until you recover, reach a set benefit end date, or reach retirement age, depending on the terms of the policy.

Effective Date

The effective date is the day your insurance coverage officially begins. From this date forward, you are eligible to receive benefits for covered health, dental, life, or disability expenses under the terms of your policy. The effective date is established once your application has been approved, all requirements are met, and the first premium payment has been received, unless otherwise specified in the policy.

Have questions about your insurance coverage?

Our licensed advisors can help you understand your options and find the right plan for your needs.