How does term life insurance work?

Term life insurance can be a good choice for anyone who wants affordable coverage with the option to transition to a permanent policy in the future. Term policies can last anywhere from 5 to 30 years, and you might even be able to get a policy through your employer at a lower group rate.

How term life insurance works: The basics

How much term life insurance do you need?

The right amount of protection for you depends on where you are in life, who depends on you, and your earning power. In general, the younger you are, the more years of income you need to consider. 

Use our calculator and find out if term life insurance is the right option for you.

Term life insurance vs. whole life insurance: which is better?

With term life insurance, the insurance protection lasts for a set period — typically 10 to 30 years. It is the more affordable option. Whole life insurance lasts for your entire life, provided you make premium payments. The policy has an extra component called cash value, that can build up a significant, tax-deferred asset, money that can be used during your lifetime.1, 2

Term vs. whole life insurance: Which is right for you

How does term life insurance work?

Term life insurance benefits

Whether you decide to get term insurance, purchase lifetime protection with permanent insurance or combine the two for customized protection – taking the time to understand the unique benefits of each is the first step toward a confident future. 

Life insurance is reassurance that you can live life to the fullest knowing your family will be financially secure if you pass away. ​

How much life insurance do you need?

Term life insurance calculator

Figure out how much you need and what it could cost


How to buy term life insurance

Traditionally, people obtain this coverage through their employer, hence the term “Group Benefits.”

  • For the first time in history, more Americans are covered by employment-based group life insurance than individual life insurance.¹
  • 57% of those with life insurance obtain it exclusively from their workplace.²

The advantage is employees pay lower premiums and, in some cases, receive better coverage than if they purchase insurance on their own.

Employer-provided insurance can be used with any insurance you buy yourself.

Term vs. permanent life insurance

Life insurance can be confusing. Simply, there are several types of life insurance – term and permanent. Term lasts for a specific, pre-set period. Permanent lasts your entire lifetime.

Depending on your needs, you may want the affordability of term life, which replaces your income and is most often used for temporary, short-term needs like your mortgage. It can be good for a growing family. Or, you may prefer the lifelong protection and cash value that most permanent life insurance products offer.

Whole life policies stay with you for life and pay out to the beneficiary or beneficiaries upon your death. Your monthly premium and the death benefit will not change once you sign the paperwork.

Universal life gives you flexibility in the premium payments and the duration of the policy but with that flexibility comes unknowns. Premiums may be lower during periods of high overall interest rates and higher in low interest rate environments to account for the lower gains on the cash value of the policy.

Talk to a financial representative or broker to learn more about what’s best for you.


Policy feature Term life Whole life Universal life
Level payments Yes Yes Optional
Choice of policy Term Yes No No
Builds cash value No Yes Yes
Flexible death benefit No No Yes
Low cost Yes No No
Guaranteed cash value growthiii No Yes No
Cash value grows with investments No No Yes
Convertible to whole life Yes NA NA

Term life insurance FAQs

What type of life insurance do I need?

Ensuring a secure financial future for your loved ones requires thoughtful planning. Each type of life insurance offers unique features and benefits, so many people have both types to provide optimal protection.

How does life insurance work?

Life insurance can help protect your loved ones financially by providing a death benefit (the tax-free payment) to your beneficiaries if you pass away. 

At what age should I buy life insurance?

You may even think that life insurance is only for recent parents or mid-aged people. But, young adults are in the very best position when it comes to purchasing a life insurance policy. The cost when you’re young is typically lower than it will be later on, so you can lock in a much better deal.

Want some help figuring out the right insurance policy for you?

Connect with local financial representatives who can help you figure that out.