term life insurance
Life insurance that provides coverage for a specific period (term), paying a death benefit only if the insured dies during the term. Typically the most affordable type of life insurance.
Example
“The 30-year term life policy would pay $500,000 to his family if he died before age 60, for just $35/month.”
Memory Tip
TERM life = coverage for a set TERM (period). Expires like a subscription. Cheapest option.
Why It Matters
Term life insurance is crucial for people who have financial dependents because it provides affordable protection during the years when your family needs you most. Understanding this option helps you make informed decisions about protecting your loved ones without overcommitting to expensive permanent coverage.
Common Misconception
Many people believe that term life insurance is wasteful because it does not build cash value, but this misses the point that term insurance is designed to be affordable protection during active earning years, not as an investment vehicle.
In Practice
A 35-year-old parent with two children and a mortgage might purchase a 30-year term life insurance policy with a 500,000 dollar death benefit for around 30 dollars per month. If they pass away during those 30 years, their family receives the full 500,000 dollars to cover the mortgage and living expenses, but if they survive the term, the coverage simply ends with no payout.
Etymology
TERM (specified period) LIFE (covering life) INSURANCE. Coverage for a set TERM.
Common Misspellings
Compare insurance quotes and save
Related Terms
More in insurance
Other insurance terms you should know
Need help with spelling?
Instant spelling checker with dialect variants for 2,000+ words.