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Term life insurance covers you for a specific, predetermined amount of time. Should you die during your policy's term, your beneficiaries will receive the payment - should the policy expire before you do, there is no pay out. Term life insurance policies are only coverage, they have no cash value or added savings feature. However, during the life of the policy, you may be able to secure loans using death benefit as collateral. Any such use of your policy will however, diminish the death benefit until the loan plus interest is repaid.
Term life insurance policies are popular among consumers because of their affordability and flexibility. With a term life insurance policy, you choose the amount and duration of your policy's coverage. Insurers typically offer term insurance policies in increments of 5 years, up to a maximum of 30 years. Some insurers also offer annually renewable one-year policies. Term life insurance policies usually feature a fully guaranteed rate that will not change over the life of the policy, but some policies may feature variable rates in return for lower premiums.
Insurers usually require a medical exam for any type of life insurance, specifically for term life insurance. Some insurers will allow a policyholder to renew an expiring policy without benefit of a new exam, but this is not always the case. Most insurers will not extend a new term life insurance policy to applicants who are 70 years of age or older.
Term life insurance is designed to offer basic coverage for a specific number of years at a reasonably low cost. This makes it an especially attractive option for people who need to protect their beneficiaries, but who do not have a lot of cash freed up for the project. A term life insurance policy can be used for any number of goals, from backing a business loan to enabling a charitable gift. If your goal is anything other than temporarily protecting loved ones against the financial hardship that would result from your death, you might want to look into a permanent policy.
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