Term life insurance provides coverage for a specific term and pays its death benefit if the insured dies during that term.
Unlike permanent life insurance, term coverage is designed to last for a limited period, such as 10, 20, or 30 years. The policyholder pays premiums in exchange for a stated death benefit. If the insured dies while the policy is in force, beneficiaries receive the benefit, subject to the contract’s terms. If the term ends while the insured is alive, coverage normally expires without a maturity payout.
Term insurance became popular because it can provide a large death benefit at a relatively low premium. Families often use it to replace income, cover a mortgage, fund children’s education, or protect a business during years when financial obligations are greatest. Premiums are often level for an initial period, but renewal may cost more as the insured ages.
A common misunderstanding is that every term policy simply disappears permanently at expiration. Some policies include conversion provisions allowing the policyholder to switch to permanent insurance without new medical underwriting, while others may be renewable. Those options, and whether premiums remain level, depend on the specific policy.