Term Life Insurance

Term life insurance is a life insurance policy that provides a fixed death benefit — payable to named beneficiaries — if the insured person dies during a specified coverage period (the "term"). Premiums are fixed for the length of the term and do not change. If the insured outlives the term, the policy expires with no benefit paid and no cash value returned.

Term life insurance is the most cost-efficient form of life insurance because it separates the insurance function from savings — you are paying purely for the probability that the insurer will need to pay a claim during the term, plus administrative expenses and profit margin. The absence of a savings component keeps premiums low.

Terms typically range from 10 to 30 years, offered in 5-year increments (10, 15, 20, 25, 30 years). The most popular is 20-year term, which covers the period when most families carry their heaviest financial obligations — young children at home, an active mortgage, and peak earning years generating the income a family depends on.

The four underwriting factors that set your rate:

1. Age — older applicants have higher mortality risk; rates increase sharply after 50
2. Health class — from Preferred Plus (excellent, lowest rates) to Standard (average health, highest rates)
3. Tobacco use — tobacco users pay 2.5–3× the non-smoker rate
4. Term length — longer terms carry higher rate because of the extended coverage period

Use the Term Life Insurance Cost Estimator to see estimated premiums for any age, health class, coverage amount, and term combination.

Annual premium:

Annual Premium = (Coverage Amount ÷ 1,000) × Base Rate × Gender Mult × Health Mult × Tobacco Mult × Term Mult

Where Base Rate = $per $1,000 of coverage per year from industry rate tables

Monthly premium:

Monthly Premium = Annual Premium ÷ 12

Cost per $1,000 of coverage per year:

Cost per $1K = Annual Premium ÷ (Coverage Amount ÷ 1,000)

Age: 35 · Male · Preferred health class · Non-smoker · Coverage: $1,000,000 · Term: 20 years

Base rate at 35 (Preferred, Male, 20yr): ~$2.00 per $1,000/year

Annual Premium: (1,000,000 ÷ 1,000) × $2.00 = $2,000/year

Monthly Premium: $2,000 ÷ 12 = $167/month

Same applicant as female: $2,000 × 0.75 = $1,500/year ($125/month)

Same applicant as tobacco user (male): $2,000 × 2.60 = $5,200/year ($433/month)

• Lock in rates early: Term life premiums are fixed at issuance. A policy bought at 30 holds that rate for 20 or 30 years. Waiting until 40 to buy a 20-year policy means paying rates based on a 40-year-old's mortality risk.
• Tobacco reclassification: If you quit tobacco and remain nicotine-free for 12 months, most insurers will reclassify you as a non-smoker on a new policy — saving hundreds or thousands of dollars per year in premiums.
• Convertibility rider: Some term policies include a convertibility rider allowing you to convert the policy to a permanent product without a new medical exam. Valuable if your health deteriorates and you need coverage beyond the term.
• Determine coverage first: Know your coverage target (via the Life Insurance Needs Calculator) before estimating costs. Buying insufficient coverage to save on premiums defeats the purpose.
• Death benefit is income-tax free: Federal law excludes life insurance death benefits from the beneficiary's taxable income in almost all circumstances — the full face amount passes tax-free.