What is Term Life Insurance?
Term life insurance is popular with consumers because it's inexpensive, easy to understand, and doesn't require any investing.
The downside to purchasing term life insurance is that most people will outlive their policy potentially leaving their loved ones without financial protection later in life.
While a term policy is the best option for most people, it's not ideal for everyone. This article explains how term life insurance works and includes real-life situations where a term life policy is the perfect fit.
Here’s what we'll cover in this post:Quick Article Guide
What is Term Life Insurance?
Term life insurance is the most affordable type of life insurance available. It provides a fixed death benefit for a set number of years (also known as the policy's "term"). If you pass away during this period, your beneficiary will receive the full death benefit from your insurance policy.
What's a Term?
A "term" is the number of years that your life insurance policy is guaranteed for. Most life insurance companies offer terms in 5-year increments that range from 10 to 30 years, but longer options may be available depending on your age. Below we've provided the age cut-offs for most carriers.| Term Length | Average Age Limit |
| 10-Year Level Term | 80 or Younger |
| 15-Year Level Term | 75 or Younger |
| 20-Year Level Term | 70 or Younger |
| 25-Year Level Term | 60 or Younger |
| 30-Year Level Term | 55 or Younger |
*Some terms may be available until later ages depending on your state of residence and health.
If you can see from the table above, most people will outlive their policy. Which is why term life insurance is more affordable than other types of coverage. It is designed to provide financial protection for a set number of years rather than an entire lifetime.
As most of us get older and closer to retirement age, our need for life insurance protection diminishes. This why term insurance is ideal for most people. Once they've surpassed major life events like paying off the mortgage, their need for life insurance is minimal.
If you need permanent life insurance to establish a trust, or maximize a pension, you should avoid term life insurance and purchase Guaranteed Universal Life Insurance policy instead. These policies work just like term insurance, but they provide coverage until the age of 90 or later.
Some term life insurance policies also offer a "conversion option" which allows you to convert a portion of your term policy into permanent coverage. In order to take advantage of this option, you'll need to convert your policy before your term ends.
What's a Death Benefit?
Also referred to as the policy's face amount, this is the amount of money that your beneficiary or beneficiaries will receive when you pass away. Many companies offer as little as $50,000, to as much as $50,000,000, depending on your income and age.
To help you determine the largest death benefit that you can qualify for, we've included the 'income multipliers" that most highly-rated life insurance companies use. These guidelines are based off of your current take-home income, before taxes, and your age.
*These general guidelines are not standard with all carriers and are accurate as of 07/07/2022.
What's a Beneficiary?
A beneficiary is whomever you want your life insurance policy to pay when you pass away. A beneficiary can be a person, an estate, charity, or a trust. You can also have more than one beneficiary if you want to leave money to more than one person or entity.
In the vast majority of situations, most people will list their spouse as their primary beneficiary. You can also list a secondary beneficiary on your policy, and this would be the person that would receive policy's death benefit if you and your primary beneficiary were deceased.
The most common example of this is when a husband and/or wife purchase life insurance and name their children as the policy's secondary beneficiary. This means if hey are both involved in an accident for example, their children will receive the money they intended to leave behind.
What Term Length Should I Consider?
The term length you decide to purchase should depend on your need life insurance. Term insurance is most frequently used to replace income lost in the event of a family member's unexpected death or pay of outstanding bills like a mortgage. The most common terms are:
- 10 years
- 15 years
- 20 years
- 25 years
- and 30 years
So, if you think you'll be ready to retire in 20 years, and your house will be paid off, a 20-year term policy is probably the best product for you. The length of your term should outlast your need for the policy or the "life event" that you want to protect.
As an Example: If you recently took out a 30-year mortgage, you'll want to buy a 30-year term life insurance policy to make sure your coverage doesn't expire before your house has been paid off.
A couple of top-rated life insurance providers like Banner Life and AIG even offer 35 and 40 year terms to qualified applicants. After your policy's term has ended, most life insurance companies will allow you to renew your policy each year for an increasing rate.
You can also ladder multiple term life insurance policies if you have more than one life event that you want to provide financial security for. To learn more about layering or laddering multiple life insurance policies, please see our, "Term Life Insurance Layering Calculator."
What Does Term Life Insurance Cost?
The cost of a term life insurance policy is determined by a variety of factors that include the amount of coverage being purchased, or the policy's face amount, and the length of the policy's term. Longer terms are more expensive than shorter terms because the shorter your term is, the more likely you will outlive it.
Other factors that have an impact on the cost life insurance include your age, health, and gender. Women have a longer life expectancy and typically pay about 40% less than men. Hazardous hobbies like bungee jumping and cigarette smoking can also have a large impact on your rates.
Below we have provided some sample life insurance rates by age to help you estimate the cost a term policy:
Term Life Insurance Rates for a Male - 10 Year Term
| AGE | $100,000 | $250,000 | $500,000 | $1,000,000 |
| 30 | $7.37 | $9.54 | $13.04 | $17.85 |
| 35 | $7.46 | $9.56 | $13.60 | $19.55 |
| 40 | $8.25 | $11.64 | $16.86 | $26.35 |
| 45 | $10.78 | $16.81 | $26.65 | $43.35 |
| 50 | $14.23 | $23.71 | $39.86 | $68.96 |
| 55 | $20.38 | $36.84 | $64.61 | $118.96 |
| 60 | $29.76 | $56.44 | $102.91 | $194.86 |
| 65 | $52.85 | $97.76 | $180.81 | $340.16 |
| 70 | $85.83 | $167.44 | $294.56 | $555.06 |
| 75 | $149.84 | $318.19 | $592.51 | $1,129.56 |
*Displayed monthly rates are for qualifying individuals in excellent health and are provided for illustrative purposes only. Rates are accurate as of 07/07/2022.
Term Life Insurance Rates for a Female - 10 Year Term
| AGE | $100,000 | $250,000 | $500,000 | $1,000,000 |
| 30 | $6.97 | $8.70 | $11.05 | $15.30 |
| 35 | $7.11 | $8.74 | $11.88 | $16.14 |
| 40 | $7.99 | $10.81 | $15.28 | $23.80 |
| 45 | $9.95 | $14.99 | $23.73 | $37.38 |
| 50 | $12.65 | $20.35 | $32.70 | $56.95 |
| 55 | $17.60 | $28.19 | $49.72 | $90.10 |
| 60 | $24.08 | $40.74 | $72.59 | $132.86 |
| 65 | $34.81 | $65.56 | $113.71 | $216.36 |
| 70 | $59.29 | $109.13 | $197.13 | $366.16 |
| 75 | $110.07 | $216.27 | $417.46 | $761.60 |
*Displayed monthly rates are for qualifying individuals in excellent health and are provided for illustrative purposes only. Rates are accurate as of 07/07/2022.
What are the Best Term Life Insurance Companies?
Every life insurance provider determines their own pricing and approval guidelines. As a result, some insurance companies are more concerned about your blood pressure than your weight, so applying with the best company for your unique health profile can save you money.
For Example: Prudential (A+ rated) will offer their best rates to healthy applicants that have a total cholesterol of 300 or less. On the other hand, an insurance company like State Farm has much less leniency. Their cholesterol limit for the top rate class best rates is only 180!
Examples like this illustrate why it is so important to shop the market and compare rates from more than one insurance company. The easiest way to evaluate your options is to work with an experienced broker that represents at least a few dozen life insurance providers.
At JRC, our comparative shopping services are completely free, and we represent more than 50 top-rated insurance providers to save you time and money. Give us a call today at 855-247-9555, or use our free quote calculator below to instantly compare rates.
No Medical Exam Term Life Insurance
Depending on your age and the amount of coverage you need, term life insurance without an exam may be available. In the past, these types of policy's were a bit pricey, but since 2016, more and more companies have entered the marketplace, causing the rates to decrease.
Most life insurance companies limit their no-exam options to people that under age 60 and applying for $500,000 of coverage or less, but a handful of insurance providers that will offer as much as $2.5MM with an exam, or you can purchase multiple policies from more than one company.
How We Can Help You Find The Best Policy
To learn more about purchasing an affordable term policy that doesn't require a medical exam, please see our article, "Life Insurance without a Medical Exam," or give us a call, toll-free: 855-247-9555. In just a few minutes we'll be able to recommend the appropriate policy for your needs.
Clifford Pendell
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.
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