What is term insurance?

By Barry Higgins AAA
A:

Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified "term" of years. If the insured dies during the time period specified in the policy and the policy is active - or in force - then a death benefit will be paid.

Term insurance is initially much less expensive when compared to permanent life insurance. Unlike most types of permanent insurance, term insurance has no cash value.

There are many different types of term insurance policies available. Many policies offer level premiums for the duration of the policy, such as 10, 20, or 30 years. These are often referred to as "level term" policies.

While premiums for these level term policies remain level for a set number of years, after this time period the premium increases significantly, making the policy cost prohibitive.

Most term policies have a built-in privilege to convert to a permanent policy regardless of any changes in the insured's health.

(To learn more about term insurance, see Buying Life Insurance: Term Versus Permanent.)

This question was answered by Barry Higgins.

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