Amy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive.
Amy Danise Managing Editor, InsuranceAmy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive.
Written By Amy Danise Managing Editor, InsuranceAmy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive.
Amy Danise Managing Editor, InsuranceAmy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive.
Managing Editor, Insurance Les Masterson Deputy Editor, InsuranceLes Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.
Les Masterson Deputy Editor, InsuranceLes Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.
Les Masterson Deputy Editor, InsuranceLes Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.
Les Masterson Deputy Editor, InsuranceLes Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.
| Deputy Editor, Insurance
Updated: Jul 9, 2024, 7:10am
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Term life insurance is usually the most affordable option when you want life insurance to cover financial obligations that are temporary.
If you’ve got specific debts to cover, like a mortgage or a child’s college education, the best term life insurance companies can provide the financial safety net you need while you need it.
Term life insurance is a contract between a policyholder and an insurance company that says if the insured person passes away within the time period of the policy, the insurer will pay a death benefit to the beneficiaries named on the policy.
If you’re buying term life insurance, you have two main decisions to make: the length of the term and the coverage amount.
The key features of term life insurance are:
A term life insurance policy’s annual costs remain the same every year for the level term period, such as 10 or 20 years. Once the level term period is over, you can generally renew the policy, but at higher rates each year you renew.
The policy expires if you outlive the length of the policy without renewing. You receive none of the premiums paid into the policy unless you bought a return of premium term life insurance policy.
Many people buy term life insurance for income replacement. They’re looking for life insurance that will provide funds for a family to pay expenses for a certain number of years if they were no longer there to work and earn money. Term life is good for:
The policyholder chooses both the length of the term and the coverage amount, such as $500,000.
If the insured person dies while coverage is in force, the beneficiaries receive the policy’s death benefit. If the insured person lives longer than the policy’s term and doesn’t renew it, the coverage ends.
You may be able to convert the term life policy to a permanent life policy, such as a whole life or universal life insurance. This is a useful tactic if you realize you want longer life insurance coverage and don’t want to shop for a new policy, perhaps because your current health would make it difficult.
Age and health are significant factors in life insurance rates when you’re buying a policy. Below are examples of average life insurance rates for healthy life insurance buyers.
Source: Forbes Advisor research. Rates are for healthy non-smokers.
The term life insurance coverage amount and term length affect your premiums. Other factors in life insurance quotes include:
A level term life insurance policy maintains the same premiums and death benefit throughout the term. Rates won’t increase as you age and the death benefit is consistent whether you die in the first or final year of the policy.
A level term life policy could be good for someone who wants consistency for many years.
An annual renewable term policy’s premiums increase each year you renew it. When you choose this policy, you’re guaranteed to keep coverage and don’t need to reapply.
It may be good for people who want to fill a short gap in life insurance. However, a short level term life policy may be a better choice.
A decreasing term life insurance policy’s premiums stay the same over the length of the policy but the death benefit decreases steadily over time.
Mortgage life insurance is a form of decreasing term life. Here the payout is tied to the declining balance of your mortgage, and the beneficiary is the mortgage lender, not your family.
Regular term life insurance is a better bet because your family receives the payout and can use it for any expenses they choose.
A return of premium life insurance policy promises to refund the premiums you paid if you outlive the policy. As you can imagine, the refund feature makes the policy more expensive.
Return of premium term life is available from companies such as AAA Life Insurance, Cincinnati Life, Pacific Life, State Farm and Vantis Life.
A good term life insurance amount is generally one that matches the debts or obligations you want to cover. Life insurance is often intended to pay a family’s expenses that would have been paid by the person’s salary.
If income replacement is your goal, you’ll want to know the approximate amount your family would need to maintain your standard of living for the time period you want to cover.
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Enter total coverage amount of existing life insurance
Now that you have an estimate of your life insurance need, you can start comparing quotes
Your savings and/or current life insurance total more than your needs. In this case, you may not need life insurance. If you want to exclude your savings or life insurance from the assets your family could spend, please lower the amounts input.
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To choose the best duration for a term life insurance policy, consider the length of the debt or situation you want to cover. For example, if you’re buying term life to cover the years until your children are through college, and that’s in nine years, you might pick 10-year term life insurance. If you just bought a house and took on a 30-year mortgage, you’re likely looking at 30-year term life.
Term life insurance is typically available in lengths of 10, 15, 20, 25 and 30 years. Some companies offer longer terms of 35 and 40 years (such as Banner Life and Protective).
The most common term life length purchased is 20 years, says Steve Robinson, Vice President of Partnerships for Legal & General America, which owns Banner Life.
If your family’s financial needs stretch past the typical term life lengths, consider a permanent life insurance policy, such as universal life insurance.
When your initial level term period ends (such as at the end of 10, 20 years or 30 years), you can renew the policy at a higher rate each year. You won’t receive a refund for your premiums paid (unless you purchased “return of premium” term life insurance).
It’s a good idea to get quotes for a new policy before you pay the higher renewal rate. Even though you’re older and may be less healthy, you could still find a better deal in a new policy.
Some folks decide they no longer need life insurance before they reach the end of the term and stop making payments. Before you go this route, make sure you truly no longer have the need for life insurance. If you end a policy and your life circumstances change later, you could regret not having kept the policy.
Here are our tips for finding the best term life insurance.
Forbes Advisor Editor
I recommend finding out whether the policy is renewable at the end of the term. Many are, but you want to confirm. If you get to the end of your term and you still need life insurance, renewing is a way to buy some time while you shop for another policy. Renewal rates can be very high, so I see this as a short-term solution.
Forbes Advisor Editor
I would make sure that a term policy I’m buying can be converted to permanent life insurance in the future. It’s a good way to hedge your bets. You don’t know what financial responsibilities you’ll have down the road, and you may find you need a permanent life policy in the future. Converting term life to a permanent policy is more convenient than buying a new policy, assuming you like the permanent policy that is available for conversion from your insurer.
Forbes Advisor Editor
I would be sure to look at the “living benefits” included in the policy or that you can add as riders. An accelerated death benefit rider is usually automatically included—make sure your policy has one. I would also check to see if you can add a rider for critical or chronic illness, which would let you take money from your own death benefit if you come down with a severe condition that qualifies.
Forbes Advisor Editor
See if the policy allows you to decrease the face amount. Then, if you find you need less life insurance in the future, you can easily lower the coverage and save some money. I think this feature is often overlooked when people buy term life insurance.
When you have a quote that you like and are ready to buy a policy, you’ll fill out an application. The life insurance agent will likely go over your application answers. You may be asked to sign releases, such as one for your medical records.
Once the application goes to the insurance company, you may be asked to do a life insurance medical exam. This often includes height, weight, blood pressure, blood and urine samples, and questions about your prescriptions and health to verify the information on the application.
Depending on your age and/or amount of insurance requested, a life insurer might also request an EKG or cognitive assessment.
Behind the scenes, the life insurance company will be doing its own research on you. This often includes:
Here’s how to organize a term life insurance shopping effort.
Use our free life insurance calculator to help you estimate your life insurance needs. In general, add up the expenses you want to cover (income replacement, college tuition, etc.) and subtract assets your family could use if you pass away (such as existing life insurance). Don’t undercut your coverage estimate. When in doubt, err on the side of more coverage. A life insurance agent can also walk you through calculations for a coverage amount.
Buy a length that covers the number of years you want to provide coverage. During this term period, such as 20 years, your rates will be locked in. For example, maybe you want coverage to last until you retire, or until your children will have graduated from college.
Younger and healthier buyers will have more options for no-exam life insurance. But if you’re in your 50s or older, or do not have a great health history, you may not find affordable no-exam choices.
Gather several term life quotes. In addition to price, look at the policies’ features such as living benefits and the ability to convert to permanent life.
Compare Policies With Leading Insurers
Term life insurance isn’t the only type of life insurance. There are also multiple types of permanent life insurance policies.
Unlike term life insurance, permanent life policies last your life as long as you make your payments. So, beneficiaries are guaranteed a death benefit with a permanent life policy. These policies additionally build cash value, which lets the policyholder tap into the policy during their lifetimes.
Here are different permanent life insurance policies:
Whole life insurance guarantees a death benefit as long as you make your payments. It also guarantees you a minimum rate of return on the cash value, level premiums and a guaranteed death benefit that won’t decrease.
Universal life insurance policies offer lifelong coverage and often build cash value, which grows tax-free. You may be able to adjust your premium payments and the death benefit, within certain limits.
There are multiple types of universal life insurance policies:
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Managing Editor, InsuranceAmy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive background in the insurance sector. With a career spanning more than three decades, she has focused her work on consumer-oriented publications.
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