Term life insurance is life insurance that covers you for a set number of years, then ends

A term policy pays a death benefit to your named beneficiaries if you die during the term — usually 10, 20, or 30 years. If you outlive the term, the policy expires and you receive nothing back. You pay a fixed monthly or annual premium for the entire term, and that premium does not change. Term policies are the least expensive form of life insurance because the insurance company is betting you will outlive the term and they will never have to pay out.

The death benefit is a lump sum — typically $250,000 to $1 million, though you can purchase more or less depending on what you need. Your beneficiary receives this amount tax-free if you die while the policy is active. The policy ends on a specific date, and after that date, you have no coverage unless you renew or buy a new policy.

Key Takeaways

  • Term policies cover you for a fixed period (10, 20, or 30 years) at a locked-in premium that never increases during the term.
  • If you die during the term, your beneficiaries receive the full death benefit; if you outlive the term, the policy simply ends with no payout.
  • Term insurance costs far less per month than permanent insurance because it has an expiration date and no cash value.
  • You choose the death benefit amount when you buy the policy, and that amount stays the same for the entire term.
  • After the term ends, you can renew at a higher rate, convert to permanent insurance, or let the coverage lapse.

How the premium stays locked in for the entire term

When you buy a term policy, the insurance company calculates your premium based on your age, health, and the death benefit amount you choose. That premium is then may provide — it does not go up for the length of the term, even if you develop health problems or the insurance company raises rates for new customers. This is one of the main reasons people choose term: predictability.

The premium you pay at age 35 for a 20-year term will be the same at age 55 when the term ends. If you buy a new policy after that, the premium will be higher because you are older and the insurance company will reassess your health. But during the term itself, your payment never changes.

What happens when the term ends

When your term expires, you have three main options. You can renew the policy for another term — usually 10 or 20 years — but the new premium will be much higher because you are older. You can convert the policy to permanent insurance (whole life or universal life) without a new medical exam, though the premium will also be higher. Or you can let the policy lapse and have no coverage.

Some policies include a conversion window — typically 10 to 15 years into the term — during which you can convert without proving your health again. After that window closes, conversion may require a new medical exam. Check your policy documents to see what options are available to you.

Term length and death benefit: what you choose upfront

You decide two things when you buy a term policy: how long you want coverage (the term) and how much money your beneficiaries will receive if you die (the death benefit). Common term lengths are 10, 20, and 30 years. Some insurers offer 15-year or 40-year terms, but these are less common.

The death benefit typically ranges from $100,000 to $1 million, though you can purchase more. Most people calculate the death benefit by adding up their debts (mortgage, car loans, credit cards), funeral costs, and the amount of income their family would need to replace. A rough guideline is 5 to 10 times your annual income, but your actual need depends on your situation.

Both the term length and the death benefit are locked in when you buy the policy. You cannot increase the death benefit later without applying for a new policy and undergoing a new medical exam. Some policies include a rider that lets you increase the benefit by a small percentage each year without a new exam, but this costs extra.

Term insurance versus permanent insurance

The main difference between term and permanent insurance is that term has an expiration date and permanent insurance does not. Permanent policies (whole life, universal life, variable universal life) stay in force for your entire life as long as you pay the premium. They also build cash value — a savings component that grows over time and you can borrow against or withdraw.

Because permanent policies never expire and include cash value, they cost much more per month than term. A 30-year-old buying $500,000 in coverage might pay $30 to $50 per month for a 20-year term policy, but $200 to $400 per month for a whole life policy with the same death benefit. Term is the right choice if you need coverage for a specific period (like until your mortgage is paid off or your children are grown). Permanent insurance makes sense if you want lifelong coverage or want to build cash value for other purposes.

Who needs term life insurance and for how long

Term insurance is most useful if you have dependents, a mortgage, or debts that would burden your family if you died. Parents with young children often buy 20 or 30-year terms to cover the years when their children are dependent. People with mortgages buy terms that match their loan payoff date. Self-employed people and business owners sometimes buy term to cover business debts or to replace their income while the business transitions.

If you have no dependents and no significant debts, you may not need term insurance at all. If you are retired and your dependents are grown, you may not need it either. The right term length depends on when you expect to no longer need the coverage — not on how long you expect to live.

Medical underwriting and how your health affects the premium

When you apply for a term policy, the insurance company will ask about your health history, current medications, and lifestyle (smoking, alcohol use). Depending on the death benefit amount, they may require a medical exam — blood work, urine test, and sometimes an EKG or other tests. Your health at the time you apply determines your premium for the entire term.

If you are in excellent health, you may may have access to for a "preferred" or "super preferred" rate, which is the lowest premium. If you have a chronic condition like diabetes or high blood pressure that is well-controlled, you may still may have access to for a standard rate. If you have a serious condition like cancer or heart disease, you may be declined or offered a much higher rate. Smokers pay significantly more than non-smokers — sometimes two to three times as much.

Once the policy is issued and the term begins, your premium does not change even if your health gets worse. This is why the medical exam happens upfront — the insurance company is locking in the risk at the time of purchase.

Frequently Asked Questions

Can I cancel a term policy before the term ends?

Yes. You can cancel at any time by stopping your premium payments. The policy will lapse and you will have no coverage. You will not receive any money back because term policies have no cash value. If you need coverage after cancellation, you will have to apply for a new policy and undergo a new medical exam, which may result in a higher premium if your health has changed.

What if I get sick during the term — does my premium go up?

No. Your premium is locked in for the entire term and cannot increase, even if you develop a serious illness or injury. This is one of the key protections of a term policy. However, if you let the policy lapse and then reapply later, a new medical exam will reflect your current health and your new premium will be higher.

Can I get my money back if I outlive the term?

No. Term insurance is pure protection — you pay for coverage during the term, and if you do not die during that time, the policy simply ends. You do not receive any refund or payout. This is why term is so much cheaper than permanent insurance, which builds cash value over time.

What happens if I die one day after my term expires?

Your beneficiaries receive nothing. The policy expired and you had no coverage. This is why it is important to plan ahead if you think you will still need coverage after your term ends — you can renew or convert before the term expires, or apply for a new policy while you are still in good health.

Do I need a medical exam to renew my term policy?

Yes. When you renew a term policy, the insurance company will require a new medical exam because you are older and your health may have changed. Your new premium will reflect your current age and health status. Some insurers offer "may provide renewal" without an exam, but this is rare and the premium will still increase based on your age.