Term life insurance provides financial protection for your family or dependents at a specified coverage amount (called the death benefit) for a set timeframe. This makes it the most affordable type of life coverage.
What Is Term Life Insurance and How Does It Work?
Term life insurance offers affordable coverage for 10 to 30 years. If you die during the term, your beneficiaries receive a tax-free payout.
Find out if term life insurance is right for you.
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Updated: July 1, 2026
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Key Takeaways
What it is: Term life insurance gives you a death benefit (your coverage amount) protection for 10 to 40 years as long as you pay your premiums.
You pay fixed monthly term life insurance premium, and beneficiaries receive a tax-free payout if you die during the term.
Healthy 25-year-olds can get a 10-year, $250,000 coverage for as little as $11 per month; 35-year-olds pay around $13 per month. Term life costs increase as you age or become unhealthy.
Who should buy it: Term life is a good option for parents, homeowners, and anyone with temporary financial obligations like mortgages or dependents. Term life is less complex and cheaper than permanent life insurance options like whole life.
What Is Term Life Insurance?
Key Term Life Insurance Terms
How Does Term Life Insurance Work?
Term life insurance works through a simple exchange: you pay a fixed premium for a set term, usually 10 to 30 years, and the insurer pays your beneficiaries a death benefit if you die during that term. In most policies, both the premium and the death benefit stay level, so a $500,000, 20-year policy costs the same in year one as it does in year 19.
If you outlive the policy term, coverage ends, and you won't get your premiums back unless your policy includes a return-of-premium rider. From there, you can renew the policy at a higher rate or convert it to permanent coverage. Letting the policy lapse is also an option if you no longer need the coverage.
How term life insurance works
How Much Does Term Life Insurance Cost?
Term life insurance costs less than most people expect. According to MoneyGeek's analysis, young applicants can get coverage for as little as $9 per month (18-year-old female with a 10-year policy and $100,000 coverage).
Your age, health, coverage amount and term length determine your premium. The younger and healthier you are when you apply, the less you'll pay throughout the entire term.
Data filtered by:
10
18
Female
No
| $100,000 | $9 | $112 |
| $250,000 | $14 | $164 |
| $500,000 | $22 | $262 |
| $750,000 | $28 | $333 |
| $1,000,000 | $36 | $436 |
| $2,000,000 | $63 | $760 |
| $3,000,000 | $93 | $1,119 |
| $5,000,000 | $154 | $1,845 |
| $10,000,000 | $270 | $3,238 |
Rates are based on average quotes for people with average weight and health ratings. Actual costs will vary depending on your profile, lifestyle, term length and coverage amount.
Life Insurance Rates by Age, Gender and Coverage
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Pros and Cons of Term Life Insurance
Term life insurance gives you the most affordable way to get death benefit protection. It works well for families, homeowners and anyone with financial dependents. Understand both the advantages of term life and the limits to choose the best coverage.
- Affordable: Term life costs five to 10 times less than whole life insurance.
- Simple: Pay your premiums and your beneficiaries get the full death benefit if you die during the term.
- Flexible: Pick your coverage amount and cancel whenever you want. No surrender fees or penalties.
- Convertible: Most term policies let you switch to permanent coverage without a new medical exam, often up to age 65.
- Temporary Coverage: Protection ends when the term expires. You're uninsured unless you renew.
- No Cash Value: Term life is pure insurance and doesn't build savings or investment value.
- Higher Cost at Renewal: Extend your coverage after the original term and your premiums go up based on your age.
Types of Term Life Insurance
Level term life insurance works for most people. Consider other types of term life insurance only for specific needs like mortgage protection (decreasing term) or as a supplement to employer coverage (group term).
Level Term Life InsuranceYour life insurance premium and death benefit stay the same throughout the entire term. Level term insurance is the most common term life type and what most people should choose. Simple, predictable and covers most families' needs.
Decreasing Term Life InsuranceYour premium stays the same but the death benefit shrinks each year. Decreasing term insurance works well for mortgage protection since the coverage decreases as your loan balance drops. Cheaper than level term but has limited use cases.
Increasing Term Life InsuranceThe death benefit rises over the policy term to offset inflation or increased future expenses. Increasing term life insurance is useful for young families anticipating growing financial responsibilities like education or care costs. This effect can also be achieved with a cost of living adjustment rider.
Convertible Term Life InsuranceConvertible policies let you switch to permanent life insurance without a medical exam. It's a flexible option for people who may want lifelong coverage in the future but can't afford permanent insurance now. Converted policies come with higher premiums.
Renewable Term Life InsuranceThese policies let you renew your coverage at the end of each term without a medical exam. Premiums increase with age. Annual renewable terms are most common, but some insurers offer longer increments.
Group Term Life InsuranceEmployer-provided coverage, often one to two times your salary. It's free or cheap but has major limitations: coverage ends when you leave your job, you can't take it with you and amounts are limited. Good as extra coverage, not your primary policy.
Return of Premium Term Life InsuranceA return of premium rider refunds all your premiums if you outlive the policy term. Sounds appealing but costs two to three times more than regular term insurance. Most people get better value buying regular term and investing the difference.
- Direct Term Life Insurance
Direct term life insurance is a policy you buy straight from an insurer online or by phone. You don't have to go through an agent middleman, so there's usually a lower premium.
DETERMINE YOUR COVERAGE NEEDS
Finding the best term life insurance policies depends on individual circumstances and specific financial needs.
Calculate how much coverage your family needs to replace your income, pay off debts and cover major expenses. A common starting point is 10 times your annual income, but consider your specific situation, including any outstanding mortgage balance, other debts (student loans, credit cards), children's future college costs, and number of years until dependents are financially independent. You can also get a quick estimate using our life insurance calculator.
How Do You Buy Term Life Insurance?
Most insurers process a term life application in a few days to eight weeks, depending on whether you take a medical exam. No-exam policies can approve you within minutes.
- Compare quotes from multiple companies. Get quotes from at least three insurers before applying, since rates for the same coverage can vary from insurer to insurer.
- Choose your coverage amount and term length. Settle on a death benefit and term, such as $500,000 for 20 years, based on your income, debt and dependents.
- Complete the application and medical exam. Answer health and lifestyle questions, then take a short health exam if your insurer requires one.
- Review your offer and accept it. The insurer sets your final rate based on underwriting. Compare it against your original quote before accepting.
- Sign your policy and pay your first premium. Your coverage becomes active once you sign the paperwork and make your first payment.
Term Life Insurance vs. Whole Life Insurance
Coverage length and cash value set the two policies apart. Term life lasts a set number of years and has no cash value component. A whole life policy stays in force for your entire life, and part of each premium builds cash value you can borrow against later.
Length of Coverage | 10 to 40 years, depending on the term | Your entire life, as long as you pay premiums |
Cash Value | None | Builds over time; you can borrow against or withdraw it |
Premium Behavior | Level for most of the term | Level for life |
Death Benefit | Fixed at the amount you choose | Fixed, plus dividends in some participating policies |
Convert to Permanent Coverage | Yes, in many policies, often up to age 65 or 70 | Not applicable |
Rates are averages for 40-year-old nonsmokers with average weight and health. Term life figures use a 20-year term length. Coverage amount is $500,000.
What Is a Term Life Insurance Policy: Bottom Line
Term life insurance gives you the most coverage for the least money. If you have dependents or debts, it's the best choice. Rates increase with age and health problems can make coverage expensive or impossible to get. Healthy 30-year-olds can get a 10-year term policy with $500,000 coverage for around $20 (women) and $24 (men) per month, according to MoneyGeek's rate survey.
Choose level term coverage for 20 or 30 years with enough death benefit to replace your income and cover major debts.
Term Life Insurance: FAQ
Buying term life insurance is easier than purchasing other types of life insurance, but you may still have questions throughout the process.
Who should buy term life insurance?
Term life insurance makes sense for people with temporary financial obligations and dependents who rely on their income. If someone depends on your paycheck or you have debts that would burden your family, term life provides financial protection at an affordable cost.
It works best for young couples and newlyweds, parents with dependent children, stay-at-home parents, single parents and business owners who want to fund buy-sell agreements, cover business loans or compensate for lost key person income.
Can you cancel a term life insurance policy anytime?
Yes, you can cancel a term life insurance policy anytime by stopping premium payments. Your coverage stops right away with no penalties. You won't get back any premiums already paid since standard term life policies have no cash value.
Is a term life death benefit taxable to beneficiaries?
No. Term life insurance benefits aren't taxable to beneficiaries. They get the payout tax-free, but estate taxes may apply to very large policies if the death benefit is included in the insured's taxable estate.
Does term life insurance cover suicide?
Yes, but only after a waiting period. Most term life policies exclude suicide during the first two years. If death occurs during that time, the insurer returns the premiums paid instead of issuing the death benefit. Once the two-year period passes, the policy provides coverage.
What happens if you miss a term life insurance premium payment?
Most term life policies include a 31-day grace period. Paying within that window keeps the policy active. Missing the deadline causes the policy to lapse, which ends coverage. Reinstatement may involve additional forms or updated health information.
Can you have multiple term life insurance policies?
Yes. You can hold more than one term life policy as long as the combined coverage aligns with your income and financial obligations. Some policyholders choose this approach to align different policy lengths with expenses such as a mortgage, education costs or income replacement needs.
What is the difference between term life and whole life insurance?
Term life costs less, lasts a set number of years and has no cash value. Whole life costs more, builds cash value and lasts your entire life. Monthly rates for a $500,000 policy at age 40 average $47 to $59 for term and $540 to $574 for whole life.
Term life insurance shoppers need reliable rate data to budget for coverage that protects their families. We built our analysis around the factors that determine what you'll actually pay.
Our quote analysis: We examined 248,399 life insurance quotes from 16 companies across 250 ZIP codes nationwide. All rates reflect 2025 data.
Sample profiles: Quotes are for nonsmokers with average health.
- Men: 5 feet 9 inches tall, 160 pounds
- Women: 5 feet 4 inches tall, 120 pounds
These profiles represent typical applicants seeking coverage.
Why we varied the profiles: Your age, gender, height, weight, tobacco use and health rating all affect your premium. We modified each factor to show how rates change across different customer types, term lengths and coverage amounts.
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About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty (P&C) Insurance Producer in Connecticut, is MoneyGeek's resident insurance expert. He has spent nearly a decade analyzing the market, first at LendingTree and now at MoneyGeek, where he produces original research on hundreds of carriers and millions of rates across auto, home, renters, health and life insurance.
He covers economics and insurance at MoneyGeek, and his work has been featured in The Washington Post, The New York Times and NPR, among other outlets.
Like all MoneyGeek analysts, he draws on independent cost and consumer experience data. No insurance company partnership influences his recommendations.
Mark holds a B.A. from Boston College and an M.A. in Economics and International Relations from Johns Hopkins University. He started his career in financial risk management at State Street and is also a five-time “Jeopardy!” champion.