Term Life Insurance
Definition
Life insurance that provides coverage for a specific period (10, 20, or 30 years) and pays a death benefit to beneficiaries if the insured person dies during the term.
Term life insurance is the simplest and most affordable type of life insurance. You pay a fixed premium for a set period, and if you die during that term, your beneficiaries receive a tax-free death benefit. If you outlive the term, coverage ends with no payout.
This makes term life ideal for covering specific financial obligations that decrease over time — like a 30-year mortgage, children's education costs, or income replacement during working years. A healthy 30-year-old can get $500,000 of 20-year term coverage for $20–$30 per month.
Term life differs from whole life and universal life (permanent insurance) in that it has no cash value component and no investment feature. This keeps premiums low — often 5-15x cheaper than permanent policies for the same coverage amount.
Financial planners often recommend the "buy term and invest the difference" strategy: purchase affordable term coverage for protection and invest the premium savings in a diversified portfolio through a brokerage account — which you can track in Clarity.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Frequently Asked Questions
How much term life insurance do I need?
A common rule of thumb is 10-15x your annual income, but the right amount depends on your debts, dependents, existing savings, and spouse's income. Consider covering your mortgage balance, children's education costs, and 10+ years of income replacement.
What happens when my term life insurance expires?
When the term ends, coverage stops. Some policies offer a renewal option at a much higher premium based on your current age. Many people choose not to renew because by then their mortgage is paid down, children are grown, and retirement savings have accumulated.