TERM LIFE INSURANCE

A term life insurance policy is an agreement between you and a life insurance company: You agree to pay a premium for a specific period of time (usually between 10 and 30 years); in return, there is a guaranteed death benefit that the company promises to pay to your beneficiaries (typically your family). The death benefit is almost always paid out in an income tax-free lump sum of cash.

Term life insurance is simpler and typically more affordable than permanent life insurance, such as a whole life insurance policy that provides life-long protection. Whole life policies have an added “cash value” component that can build up a valuable tax-deferred asset – money you can use during your lifetime. A term life policy has no cash value component: once the life insurance term is over, there’s no value or payout to your family.