Term Life Insurance: Everything you need to know

An ultimate guide to the ins and outs of Term Life Insurance.

It’s good to have everything planned out; the future seems a little less scary when you have a contingency plan in place in case things go sideways. 

The future can’t be predicted or controlled, but how you’re going to live it, can very well be. Wouldn’t it be great if you knew your family would be well taken care of after you died? All the expenses of your children’s tuition will be covered and all your debt paid off? It is possible, but you need to act now!

Term Life Insurance Definition

Term life insurance is defined as the amount of life insurance coverage promised within a period of time. This policy states that in case the insured person were to die within the declared period of time, the money will be transferred to beneficiaries (confirmed and selected at the time of policy) to inherit it. 

During the course of this declared time period- let’s say 25 years- the insured person pays a premium amount (a standard fee each month) to the insurance company. If the person, or their spouse (provided they are also covered) dies within these 25 years, all of the money is transferred to beneficiaries. 

If the term ends and you don’t die, no one receives the money- although you will have a chance to renew your term for another extended amount of time. 

Do you get your money at the end of a term life insurance?


But if you die, your beneficiaries will.

In simple words, this policy isn’t useful if the time period ends before the insured person dies, however, if the unfortunate were to happen, you would know that your family is financially stable and that is because you had a plan! 

What happens to term life insurance if you don’t die?

The policy duration expires, you will have to renew it. And you won’t get any returns on the expired duration of the policy. 

It doesn’t matter how old you are right now, or if you have or haven’t started your family as yet, the time to get term life insurance is now! A premium amount of $25-$30 is to be paid each month and maybe one day your family will eat the fruit of your wise decision today. 

Can you cash in term life insurance?

No. You can neither cash in nor withdraw term life insurance. There is only guaranteed death benefit. 

How does Term Life Insurance work?

The process is standard and simple- when you’re done selecting a good insurance company based on your needs, you will go through a simple documentation process. Your name, credentials, demographics and other basic information will be recorded. After that, the insurance company will decide which policy suits you best and how much premium you have to pay based on your health and other information you provided. 

They might also ask extensively about your health, if you have smoking habits or some permanent ailment, what your daily routine is like, what your hobbies are etc. In some cases they might also want you to take a medical exam for more satisfactory results and to better determine which policy will be most beneficial for you. 

An example

Let me give you an example with numbers to make it easier for you to understand.

Kevin is 40 years old and wants to buy a suitable plan for his family that would protect their financial needs in the unfortunate situation that he dies. He goes to the best insurance company and opts for a term life insurance plan. 

He buys a 10 year program of $500,000 with a premium fee of $50. In case he dies during the said 10 years, his beneficiaries will receive all of the money. If he is able to outlive this period, no one will get anything. 

Instead, he will have to renew his policy if he wishes to receive benefits. But this time when he renews the policy, the premium will be higher because now he is 50 years old instead of when he was 40 during the first time around. 

Kevin made a good decision keeping the security of his future in mind- he had to look after his family on the off chance that he is no longer able to be there for them. A term life insurance has a guaranteed death payout which looks after your family under unfortunate circumstances. 

For Seniors

With increasing age, if you don’t have a family to look after, you may still have a spouse who will need finances to survive. In such a case, insurance policies are crafted especially for seniors who wish to secure the future of their beneficiaries. 

But which plan should be best suited for them? Let’s look into the options available that cater to seniors.

Term life insurance for seniors

As mentioned above, term life will only benefit if the insurer dies, and often such a policy doesn’t incur any further benefits. Another disadvantage is the age factor that decides premium: the older you are, the higher the rate will be. 

Guaranteed Universal Life Insurance

This kind of policy is a little easier to understand and incorporate, if you are unable to qualify for term life insurance on the basis of your deteriorating health, universal life may be the best option for you. With some universal strategies, you can diminish or even skip installments in spite of the fact that this may make the value of the strategy grow at a more slow rate since you are covering your installments with the current cash value.

Final Expense Insurance

Often termed as ‘burial expense’ this insurance is aimed to cover funeral costs and others such as unpaid medical bills. These days funerals can be costly, and to have an insurance amount to cover that can be a good option for most seniors, and even people with old parents. This kind of insurance has a maximum amount of up to $10,000-$15000 with a very low amount of premium per month. Here, seniors aren’t even required to qualify for a medical exam- instead they are only required to fill out a detailed application about their health status in order to get the final expense insurance. 

Term Life Insurance Rates for Seniors

If you’re a senior looking for a suitable plan, it is important to know all your calculations beforehand.

These are sample rates of healthy men and women extracted from an online source at The Lincoln Heritage Life Insurance Company. I have created a table here for better understanding:


Age Men Women Death Benefit Type of Insurance
60+ $336 $281 $250,000 Universal Life Insurance 
70+ $195 $170 $250,000 Life Insurance
80+ $183 to $286 $136 to $211. $10,000 Final Expense


Child Term Life Insurance

There are many people who want to buy life insurance for themselves or their parents, but what about children? There is a fraction of people who want to buy child term life insurance policies but aren’t sure if it is the right way to go or not. 

Let’s clear one thing: it is very much possible to opt for a child term life insurance!

However, the chances of a child dying are obviously very low as compared to an elderly person. In such a case child term life insurance may not be the best option.

In other cases, the benefit of opting for this choice may be that the child can later on in their life receive benefit from whole life insurance. Either to pay college debt or marriage expenses. A permanent life insurance policy will be tax-deferred and can be cashed in later in life in exchange of the policy.

Moreover, a whole life policy for a child may also guarantee qualifying for more coverage later in life. For instance if a child is diagnosed with a severe health condition, they probably won’t be able to qualify for higher coverage, so buying a policy now will give the child some advantage over savings and money to be used later in life. 

Types of term life insurance

  • Guaranteed Level Term Life Insurance: This is the most common form of term life insurance policy used today; it clearly states that all death benefits and guaranteed premiums are for the chosen specific period of time- usually 10, 20 and 30 years. This is a guaranteed issue term life insurance which a lot of people choose to suit their needs. 
  • Modified Term: In this type of insurance policy, the premium amount changes at an interval of every 5 to 10 years of time. All other benefits remain the same such as the coverage of funeral costs, coverage of policy duration- but the premiums tend to increase over time.
  • Yearly Renewable Term (YRT) Policy: These policies don’t have a specified term but is an annual renewable term life insurance. Each year that the policy is renewed, of course, the premium amount also increases.
  • Decreasing Term Life Insurance: This type of insurance policy is paid over a constant number of years- here, the payout decreases with each year passed in the duration of the policy. These are often used to pay off debts and loans because they also decrease over time.
  • Convertible Term: This is the kind of insurance policy where term life can be converted to a permanent one by adding 10 years or even the term period itself. People usually do this to stay safe and choose this as a contingency plan in case their financial conditions were to change in future. 
  • Level Premium Term Life Insurance Policies: This is a kind of policy where the premium amount remains constant for the entire duration of the policy, but the amount of coverage increases. The most popular durations for this kind of policy range from 10-30 years.
  • Return of Premium: This is the kind of term life insurance where if a person outlives the policy duration, all premium he has paid over the years is refunded without interest. And the money isn’t taxable either! 

Unfortunately many companies have discontinued this return of premium term life insurance. According to Insurance Quotes2Day, the only companies that do provide Return of Premium options are:

  1. AAA Life Insurance Company
  2. Americo Financial Life and Annuity Insurance Company
  3. Assurity Life Insurance Company
  4. Baltimore Life Insurance Company
  5. Columbian Life Insurance Company
  6. Cincinnati Life Insurance Company
  7. Illinois Mutual Life Insurance Company
  8. United Home Life Insurance Company
  9. United Farm Family Life Insurance Company
  10. United of Omaha Life Insurance Company 

Term Life Insurance vs. Whole Life Insurance

One common aspect where most people are confused is while comparing term life insurance with whole term life insurance: what is the basic difference, which one is better term life or whole life insurance, and other questions that people often wonder about. Term life insurance comparison is usually done with whole life insurance, but there are also plenty of other types as discussed above.

Let’s start with the basics. 

We are clear on what term life insurance is. Simply put, it is the payout if an insurer dies within the declared period of time. We will discuss the pros and cons later in this article so that you know exactly what the advantages are and what the disadvantages are for term life insurance.

Now let’s see what whole life insurance is.

Like the name suggests, whole life insurance stays with the person for an entire lifetime if the premiums are well paid. This also gives you a cash value- meaning that all the sum is accumulated and can be given to you upon request during your life. 

If we compare the two, whole life insurance of course costs more because it provides lifelong support. It is also accumulated in a tax deferred account which means tax won’t be liable while the sum is being gathered. 

Pros of Whole Term Life Insurance

  • The premium amount remains fixed all through your life.
  • A guaranteed death benefit in case you die.
  • No future medical exams.
  • Lifelong coverage.
  • Tax saving opportunity.
  • Guaranteed rate increase in the cash value account.

Cons of Whole Life Insurance

  • More expensive than life term insurance plans.
  • Low amount of death benefit.
  • Complicated process.

Pros of Term Life Insurance

  • Guaranteed death benefit if you die.
  • Premium costs less.
  • Usually premium stays the same (unless you choose otherwise).
  • Policy flexibility (choice of duration- 5, 10, 20 years etc).
  • Can be converted to whole life insurance as well.

Cons of Term Life Insurance

  • No cash value.
  • Temporary coverage.
  • Must still be eligible in order to renew.

So how do you decide which one is better?

Among all the types and kinds of insurance policies discussed above, it is natural for a person to feel overwhelmed with information. If you’re choosing a policy plan for yourself, you need to be sure that it will benefit you and your family even after you’re gone.

So in all this influx of knowledge, what factors determine which is the best plan for you? Whether you should opt for term life insurance or whole life insurance? And why?

To answer your question, we need to map out important factors that will affect your decision. 

If you are young and are just about to start a family, it is obvious that you will be financially tight. You have a whole life ahead of you which includes a wedding, buying a house, routine expenses, child expenses and what not. In such a case where you have just started on your career journey, term life insurance is the best option for you because it is affordable and the funds will take care of your family, should anything happen to you.

If you’re looking for the money to reinvest and use the ‘savings’ in your life for an added expense, a whole life plan may be better for you. However, because of changing market rates and a low rate of return, this type of policy may not be suitable for many people and shouldn’t solely be used as an investment option. Not only does it have a high cost of premium but also the risk of fluctuating market rates is an important factor.

Can you have both term and whole life insurance?

Of course you can! In fact it is completely legal to have both policies under your name.

There isn’t any such rule that defines how many policies you can have.

You can apply for as many policies as you want to; all you have to do is consult the right people and insurers so they can guide you better on the type of application you will have to fill and which plans will suit you best.

After you have gathered all the information about different types of insurance and policies, you will be able to decide better which plan secures the future of your family. There are many factors that decide which is why it is important to take everything into consideration before pointing to a particular plan and settling with it. 

Best Term Life Insurance Companies in 2020

  • Prudential: Kind of like an all rounder company with a wide range of policy options and best ratings for financial strength. 
  • State Farm: No need for a medical exam, easy process
  • Transamerica: Has the best value in the domain, fast and reliable company
  • Northwestern Mutual: Popular life insurance policies, great whole life insurance
  • New York Life: Best term policies and flexible in needs and qualifications
  • Mutual of Omaha: People are qualified without the hassle of giving a medical exam
  • USAA: USAA term life insurance only caters to military people and veterans, specializes in a wide range of policies that benefit insurers and their families

Cheapest Term Life Insurance Companies

Of course, the best term life insurance companies mentioned above may also be super expensive for an ordinary man. So i don’t want to only give you an option where only big money makes its way.

There are some companies that are good at what they do and that too at a very affordable rate. Here is a list of the cheapest term life insurance companies that you may consider for your next plan:

  1. Banner Life
  2. Principal
  3. Transamerica
  4. Protective
  5. Mutual of Omaha
  6. Progressive Term Life Insurance

Upon visiting websites of the mentioned companies above, you can navigate through some of the most affordable plans that will surely secure the future of your family. These plans are tailored to suit the insurance needs of an average citizen and that too on a budget friendly rate.

Term Life Insurance Rates

Now that we’re a bit clear on what theoretical part of insurance is, let’s dive into numbers!

Term life insurance cost varies on the account of a lot of different factors such as age, health, smoker/non-smoker etc. With each factor that deteriorates, the premium amount is different. 

The best time to start thinking about life insurance and opting for suitable term life insurance plans is now! With your increasing age, the rate will likewise increase too.

This table will very well explain the average term life insurance rates by age in 2020:

For Women:

Age at purchase Policy amount 20-year term life 30-year term life Whole life
30   $250,000


$1 million










40  $250,000


$1 million










50  $250,000


$1 million










60 $250,000


$1 million




Not available. $7,015




For Men:

Age at purchase Policy amount 20-year term life 30-year term life Whole life
30 $250,000


$1 million










40 $250,000


$1 million










50 $250,000


$1 million










60 $250,000


$1 million




Not available. $8,186




Note: All of these term life insurance quotes that have been quoted here are credited to Quotacy.


Term Life Insurance Premium Calculator

To find a suitable plan for yourself and your family is an important task that you need to cater today. With all the rates mentioned above, you may have had a rough idea about insurance rates and what you could be paying in the near future.  

However, insurance numbers don’t just work on estimates. You need an exact amount of what is going out of your pocket each year. 

For this purpose, the internet is full of options for a term life insurance calculator which will help you conclude an amount by the end. These are online options that take into account all your answers based on questions about yourself, your family, their plans, your plans and your financials.

How much Term Life Insurance do I need?

Well, this is a good question. And kind of an important one as well.

The answer to this is with you. You need to ask yourself why you’re even going for an insurance policy in the first place? Why do you need it? 

Is it because you’re about to get married and will have to pay all expenses of two people from now on? Is it because your children will go to college someday? Or because a big family might need a big house someday? Or simply because you want to protect your family from budget constraints?

When you find out your reason to buy an insurance policy, you have to next evaluate when this reason will no longer be a reason!

Whatever your answer to these questions is, will tell you the duration of your insurance period.

For instance, if you’re aiming for paying off a debt that is ending in 8 years, you go for a 10 year plan.

If your children will be up and graduating in the next 16 years, you go check out for 20 year term life insurance rates and so on.

Whatever your needs are, YOU are who will determine the duration of your plan. So do your research, keep all future prospects in order and choose wisely. 

Am I eligible for a Term Life Insurance plan?

If you fall in the working class, you’ll be eligible for a group term life insurance plan. 

Most people are eligible for insurance plans, so that’s a plus point for everybody. 

Premium may vary from person to person even on the same plan based on their age (low age, low premium) and health: non-smoker, no physical or health condition, no ailment, no family history of cancer, no blood pressure problems- in such a case you will find a good affordable deal!

What is the maximum age for Term Life Insurance?

The maximum age that some companies offer a term life insurance is 65.

Most of these plans are for people between 18-65 years of age.

This is the age bracket where people are eligible to apply for a plan; 18 is when most kids are planning to move out and may need solid backup for future plans- could be a house they’re buying into or even to pay off their college debt. 

If you’re diagnosed with any terminal illness during the first policy bracket, you won’t be allowed to renew it if you outlive your tenure. In some cases, however, that is still possible but the premium fee is a lot higher.

Buying Term Life Insurance

Now that you have decided what you want and what kind of plan suits your needs, the next step is to look around and go for the most affordable term life insurance plan.

This process is called shopping around for a term life insurance policy. 

However, looking for the cheapest plan shouldn’t be your main objective, you would want to go for an insurer who is still in business a couple of years down the road. To check this, the market will very well be aware of who genuine insurers are and who are just there for the money. 

Check out the rating and reviews of each company you come across. The best way to have a genuine opinion is by asking around. There must be friends and family who must have opted for an insurance plan; ask them which one suited their needs, what problems they faced and if they have useful tips to give to you. A personal contact as such will give you a good amount of unbiased information that you need to get started. 

If you want to check ratings of insurers online, the internet has a couple of tools to help you out. You can check LifeInsure or AccuQuote for a better comparison of companies and a definitive quote about insurance. 

How do I cancel Term Life Insurance?

There are many reasons why people might want to cancel their term life insurance; the most common being they no longer need it! It is possible that the reason is no longer relevant even if you have a couple of years left in the duration of the policy. 

In such a case you are able to cancel term life insurance at any time. 

You can either stop paying premiums, and when the grace period ends, the insurance will obviously be cancelled.

Or you can do it the professional way by writing a letter/email to the company and formally end the contract.

Both ways are very well applicable. Please note that cancelling the policy is possible, withdrawing money while the insured person is still alive is NOT possible in a term life insurance policy. 

‘Peace of Mind’

Growing up and entering the world of practicality is exciting, but is overwhelming as well. For some the journey can be very worrisome. And all this can be doubled if there is financial constraint. 

Just the thought of having money (with or without the aim of spending it) is relieving. It is the assurity that you have backup in rainy days. If still having a sum amount by the end of the month can bring you such contentment, imagine how much peace of mind a financially secure future will give you. 

Everyone works themselves up all their life just to have this contentment, and what if during this process you were to unexpectedly die? How will your family cope up? Who will pay the bills?

Just knowing that a genuine insurance plan can set your family to a secure path is so satisfying and relieving, which is why some experts call it a ‘peace of mind’ product. Insurance gives you that peace of mind. 

What’s Next

Buying an insurance plan is a tough job, but after you’re done with it, it is all very easy. The way forward however is important to acknowledge. Make sure you’re prompt with your payment of premium each month, because if you’re not, I hate to break it to you, you’re not insured.

The term life insurance premium is nominal and pretty much affordable, so make sure you pay on time. Think about the brighter future of your family should anything unfortunate happen to you. 

Tony Bennett

Tony Bennett

Tony Benett makes his living in the insurance industry by teaching and consulting. He is also recognized by the legal profession as an expert on insurance coverages. His insurance experience includes having worked at the company level, owned an independent general agency and having worked for an insurance association. He has received various certificates over the past few years and helps his clients and readers by giving them a realistic outlook on what they can expect to achieve within their set targets. At Insurance Noon, he is known for his in-depth analysis and attention to details with accuracy. He has been published as one of the most referred agents by his peers in the insurance community. Tony loves the outdoors and most sport events. His passion other than providing excellent advice is playing golf.

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