Term Life Insurance

Term Life provides life insurance only for a limited period of time, or "term." Other types of policies such as whole life, and universal life are considered to be "permanent" insurance, and are designed to provide protection for the entire life of the insured. Term insurance provides only "pure" insurance protection and does not have the cash value feature typically found in most permanent life insurance policies. Term insurance may be compared to an automobile insurance policy. While the auto policy is in force, the insured enjoys protection against loss from an auto accident. If no accident happens, no benefits are paid under the policy. At the end of the period covered by the policy, the policy expires without value unless it is renewed by paying another premium payment. Basically, term insurance works the same way. 

Many companies currently offer term insurance that guarantees premiums for periods of 10, 20 and 30 years depending on the age and health of the insured.

Unlike permanent insurance plans in which premiums usually remain level over the life of the policy, the periodic cost of term insurance increases as the insured becomes older. In later years, the premiums for a typical term life policy will far exceed those of the typical permanent policy, assuming they were both purchased at the same time. Term life insurance is suitable for financial obligations that cover a short or intermediate period of time, like income during a minor's dependency, or to cover a short-term loan.