From the Learning Center

A Guide to Term Life Insurance (with Pros and Cons)

By the Bestow Team·August 10, 2021·5 Minute Read

In this Article

If you’re like most people, life insurance is one those grown-up to-do’s that never quite makes it to the top of your list. You assume that because it’s so important, it must also be complicated, time consuming, and expensive. Au contraire, friend! There is a simple and surprisingly affordable solution to help protect the financial future of the people you love: term life insurance. In this article, we’ll discuss term life insurance pros and cons. 

What Is Term Life Insurance?

First, let’s zoom out. You know what life insurance is — it’s essentially a contract between an insurance company and their policyholders (that’s you!) that says if you were to pass away, the insurance company will pay out an agreed-upon death benefit to your chosen beneficiaries (like a spouse, partner, or children). It’s something that can help you feel like you’ve got a plan in place for your loved ones should you pass away. Talk about peace of mind!

As you’ve no doubt figured out by now, there are different term insurance policies out there. If affordability and convenience are important to you, term life insurance is a great place to start looking. Simply put, a term life insurance policy covers you for a chosen period of time, typically with ten, fifteen, twenty, twenty-five, and even thirty-year coverage options. Those periods of time can possibly coincide with financial obligations like the length of a mortgage or the time it’ll take your kids to reach independence. 

How Does Term Life Insurance Work?

Here are three components of term life insurance to consider:

Term Length

First, you pick a specific time period, usually between ten and thirty years. A ten-year term life insurance policy means you’re covered for ten years. Twenty-year term for twenty years, and so forth. With some policies, your term length is fixed and unchangeable, while some other products offer the flexibility to alter your term at any time. The latter is referred to as convertible term life insurance.

The Death Benefit

Next, you pick a coverage amount. This is the death benefit—the amount your beneficiary (or beneficiaries) would receive if you were to pass away within the term of your policy. For example, Bestow offers term life insurance coverage between $100,000 and $1,500,000.

The Premium

The premium is the amount you pay for the coverage. Once you buy your term life policy, your premium remains the same throughout the term. So when you hear insurance folks whispering the familiar refrain of “lock in your rate today,” that’s what they’re talking about.

Life insurance premiums might be more affordable than you think. If you’re wondering what your rates might be, get a quick quote here (like thirty seconds quick).

Forbes - Ranked #1 “Best Life Insurance Company” in the U.S. by thousands of real customers. Get a quote.

Types of Term Life Insurance

Let’s explore the different types of term life insurance:

Level Non-Renewable Term Life Insurance

The premiums of level non-renewable term life insurance policies are unchanging. You lock in your rates, select your death benefit, and the length of your term at the time of purchase. If you pay your premium, your policy stays in force for the entire term (typically ten to thirty years).

If you are alive at the end of your policy’s term, your coverage also ends. If you still need coverage, some insurers offer the option to renew with an adjusted rate, but you can also buy a new policy.

Renewable Term Life Insurance

The name says it all: a renewable term life insurance policy can be renewed at the end of the term. You pick a death benefit and a term length, and when the term ends, you can renew the term policy without the need for new life insurance underwriting. The renewal term can be annual or based on the initial number of years of coverage you purchased — for example, if you were to purchase a ten-year renewable policy, you could then renew it for ten more years. 

With renewable term life insurance, the monthly premium will be adjusted based on your attained age at renewal.

Decreasing Term Policies

With this type of term life insurance policy, the death benefit decreases by a predetermined amount each year of the term policy while the premiums stay the same. This might be a great fit if you have a mortgage and are looking to protect your loved ones from bearing the burden of house payments if you were to pass away, but it may not be the best option for people with dependents and debt.

Pros and Cons of Term Life Insurance 

Here is a snapshot of some of the pros and potential cons of term life insurance: 

√ Generally less expensive than some other forms of life insurance

√ Term-lengths offer options to fit many different needs and financial situations

√ Level premiums means the rate you pay is locked in for the entire policy term

X Does not accumulate cash value

X Death benefit is not permanent (once the policy expires, so does coverage)

Other Types of Life Insurance vs. Term Life Insurance

While this article focuses specifically on term life insurance, it’s also important you know what else is out there. A permanent life insurance policy (either universal or whole life) offers coverage without terms. 

Type of Policy Policy Length Summary
Term Life InsuranceGenerally between five to thirty years
  • Lower monthly premiums
  • Term lengths to fit your needs
  • Coverage is only active throughout the term length
  • Whole Life InsuranceEntire life
  • Higher premiums
  • Permanent coverage
  • Cash value component
  • Universal Life InsuranceEntire life
  • Higher premiums, but with flexibility throughout life of the permanent policy
  • Permanent coverage
  • Cash value component
  • Bestow Makes Applying for Term Life Insurance Easy

    If you feel ready to take the next step and apply for coverage, Bestow makes the whole process a piece of cake. Bestow’s term life insurance application is online and takes as little as five minutes to complete, with no medical exam, blood test, or week-long waiting period. Upon approval, you can purchase up to $1.5 million in coverage.

    Rates with Bestow start from just $11/month. Get a free quote here — it’s lightning fast, and you don’t even have to share your email to get an estimate.  

    Key Takeaways

    • Take time to weigh out the pros and cons of term life insurance before buying a policy.
    • There are a few different types of term life insurance: level non-renewable term, renewable term, and decreasing term.
    • Term life is one of the simplest and least expensive type of life insurance, but there are other options, such as whole and universal life insurance