What does Term Life Insurance Cover?

Term life insurance is life insurance on an individual person that pays out a death benefit to the beneficiary if the insured person dies from an accident or natural causes.

The "Excluded" causes of death are stated in the life insurance policy. For example, suicide is excluded if it happens within 2 years of purchasing the policy (one year in some states).

Upon purchasing the life insurance policy the owner of the policy (which may be the insured) chooses a beneficiary or beneficiaries who would receive the death benefit proceeds from the life insurance policy upon the death of the insured.

In a term life insurance plan you select the "term" which is the duration of your life insurance coverage. Term policies may last for a term of 10, 15, 20 or 30 years.

If the insured person dies during the term while the life insurance coverage is "In Force", the death benefit is paid out.

If the insured person outlives the term of the term life insurance policy, there is no death benefit paid on the policy.

Learn more about term life insurance coverage and how it works.

What does Term Life Insurance Cover?

Term life insurance provides death benefits to the named beneficiaries of your life insurance policyholder. People typically buy a term life insurance policy to cover living expenses for their families, as well as large expenses like a mortgage loan or college tuition, in the event that the insured person passes away during a specified term of up to 30 years. Sometimes people buy just enough term life insurance to cover end of life expenses including burial and funeral costs.

When you buy a term life insurance policy, you select a term (duration), such as 10, 15, 20 or 30 years, and an amount of life insurance coverage, typically ranging from $25,000 up to as much as $1,000,000 dollars or more.

The expenses you want your term life insurance to cover should help you determine the amount of life insurance you purchase. For example, you might want to factor in your family's anticipated future expenses, including:

1. Estimate your family’s annual living costs including housing, insurance, utilities, etc.

2. Add any anticipated costs your family will face in the future. For example, if you know the family car will need to be replaced within a few years, you could add the cost of a new vehicle.

3. Calculate the amount it would cost to pay off your home mortgage loan.

4.If your children are still in school, add the cost of their college education, in addition to the cost of their annual activities including sports and music lessons, etc.

5. You may even want to include the anticipated costs of your children's weddings among major financial expenditures you can foresee in your family's future.

Once you add up the total expenses you want your term life insurance policy to cover, you can then deduct any assets, such as savings and investments, that would also help to cover those costs to help you arrive at an appropriate amount of life insurance needed to adequately protect your family.

Here is a term life insurance needs calculator to assist you in deterring an accurate amount of term life insurance coverage to buy.

Compare Term Life Insurance Quotes

Is Term Life Insurance a Good Idea?

Whether or not term life insurance is a good idea depends on your own personal situation and life insurance needs.

What do you want your term life insurance policy to accomplish?

Term life insurance provides temporary protection for up to 30 years. Most term life plans allow you to choose coverage for a period of 10, 15, 20 or 30 years when you purchase your policy.

Since term life costs a lot less than any other type of life insurance you can get a lot more life insurance for your money. However, the longest term available is 30 years.

So, if you need life insurance for 30 years or less, then term life may be a good idea. Remember, if you outlive the "term" of your term life policy, your life insurance coverage expires.

Click here to learn more about term life insurance