Term life insurance can be a simple and affordable option when compared to other types of insurance. It provides coverage for a set period of time or “term” (typically 10-30 years), and is designed to protect your dependents. If you pass away during the term period, your beneficiaries receive a lump-sum payment (referred to as the “death benefit”), which can be used to cover expenses or lost income related to your passing. You select a term based on how many years you need protection for your family.
You pay a monthly premium for the term to keep the policy in place (similar to car insurance or a subscription). If you were to pass away during the term, whoever you designate as a beneficiary will receive a lump-sum payment for the policy proceeds.
If you live through the duration of your term, you can either elect to let your life insurance coverage end, or in some cases, you may be able to renew your coverage. You can also re-apply for a new policy. Because life insurance premiums for new policies increase as you age, re-applying after your initial term means your rate will be much higher. So consider a term that lasts until you anticipate no longer needing financial protection for your loved ones.
If you pass away after the term ends and you have not renewed your coverage or bought a new policy, no benefit would be paid.