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Term life insurance
· Insurance type
Standard practiceWhat most planners, CPAs and attorneys recommend.
Life insurance for a set number of years, such as 10, 20 or 30, that pays only if you die during that term.
See it on the Personal Finance & Estate map →How it works
Premiums stay level for the term and are the cheapest per dollar of coverage; a healthy 40-year-old can often buy $1 million for 20 years for well under $100 a month. There is no cash value. Who it's for: anyone whose death would leave a gap, such as a mortgage, children or a dependent spouse. Many policies can convert to permanent coverage without a new exam before a deadline. Main trap: coverage often ends in your 60s or 70s, just as estate needs may begin.
Why it matters for you
Standard practice for income replacement: cheap, simple and easy to compare. Many planners advise buying term and investing the difference unless a need truly lasts for life.
Think of it like
Like leasing instead of buying: low cost and real protection for the term, but no equity at the end.
Rules, limits and sources (2026)
Insurer rate filings and quote services; LIMRA sales studies; industry research finds most term policies expire or lapse without ever paying a death claim.
Connections (2)
▸Term life insurance is the simplest, cheapest form of Life insuranceStandard practice
How they connect
Term life is life insurance stripped to its core: a level premium buys a death benefit for 10, 20 or 30 years, with no cash value. Because most policies expire unused, premiums are a fraction of permanent coverage, making it the standard choice for income replacement while children are young or debts are high.
When it applies
Sold throughout the industry's history; competition and online quoting since the 1990s made level 20- and 30-year term cheap and common.
How sure?
State insurance codes and NAIC model rules define term coverage; LIMRA tracks its share of US individual life sales each year.
Watch out for
'Buy term and invest the difference' is standard advice, but whether people actually invest the difference, as the strategy assumes, is debated.
▸Whole life insurance costs far more than Term life insuranceStandard practice
How they connect
Both pay a death benefit, but whole life also funds coverage for life and a savings component, so the same $1 million can cost 10 or more times as much (estimates vary). Term covers the years when the need is biggest; whole life covers needs that never end. Many term policies convert to whole life without new health questions.
When it applies
Whole life dominated US sales through the 1970s; cheaper term and the 'buy term and invest the difference' pitch gained ground from the late 1970s.
How sure?
Side-by-side insurer quotes and illustrations; state insurance regulators' buyer's guides explain the cost difference.
Watch out for
Whether 'buy term and invest the difference' really beats whole life depends on discipline, taxes and returns; studies and salespeople disagree.