Term Life Insurance
Life insurance that provides coverage for a specific period (term) such as 10, 20, or 30 years, with no cash value component. If the insured dies during the term, beneficiaries receive the death benefit; if the term expires, coverage ends unless renewed.
Example
“David purchased a 20-year term life insurance policy for $500,000 to protect his family's mortgage and his children's college expenses while they're financially dependent on him.”
Memory Tip
Term life = 'Temporary life insurance' - it's like renting coverage for a specific term, not buying it forever.
Why It Matters
Term life insurance provides maximum death benefit protection at the lowest cost, making it ideal for young families or people with temporary financial obligations. It ensures financial security during critical periods when dependents need protection most.
Common Misconception
Many people think term life insurance is 'wasted money' because it doesn't build cash value, but it serves its purpose by providing affordable protection when needed most. The goal is for the term to expire without a claim, meaning you've outlived the financial need.
In Practice
Jennifer, age 30, pays $35 monthly for a $750,000, 20-year term policy. When she dies at age 45 in a car accident, her family receives the full $750,000 death benefit tax-free. Over 15 years, she paid only $6,300 in premiums but provided three-quarters of a million dollars in financial protection for her family.
Etymology
The term combines 'term' from Latin 'terminus' meaning a fixed period or boundary, with 'life insurance,' indicating coverage that lasts for a specified timeframe rather than the insured's entire lifetime.
Common Misspellings
Compare insurance quotes and save
Related Terms
More in insurance
Other insurance terms you should know
See Also
Need help with spelling?
Instant spelling checker with dialect variants for 2,000+ words.