Term life insurance is excellent coverage as long as you do not try to keep it for too long. It is intended to give you access to death benefits for your heirs that are large enough to cover their immediate needs upon your death. However, term insurance gets very expensive if you attempt to keep it late into your lifetime.
Term life insurance does not build cash value in the policy.
Unlike whole life insurance, you receive no cash value with a term policy. Your premium only pays for the cost of the value of your insurance. The idea is that you will invest the difference between the cost of whole life insurance and term insurance to make up the additional needed value. If you do not plan to do this, you may find whole life insurance to be a better option for you.
Some term life insurance offers a level premium for the duration of the policy.
With this type of insurance, you will pay the same amount per period for as long as you keep the policy in force. The trade for level premiums is a decreasing value to the insurance coverage as you age. The dollar value of the death benefit will be lowered every 5 years or so until it is no longer worth keeping. Most decreasing term policies either stop at about age 70 or convert to a burial policy that is somewhat costly. Buying prepaid burial insurance is probably a better deal at this point.
Frequently, people prefer to buy term life insurance that holds its value constant during the policy term.
In this case, the face value of the policy never changes as long as it is kept in force. It is considered guaranteed renewable. This means that the policy will be not be canceled due to declining health or injuries in the insured. This is a great policy for young people with growing families that need the protection of cash to provide for the care and education of the children in the event of the death of a parent or parents. Since term insurance is a bargain for young people, it can give their heirs piles of money to keep the heirs life on track financially until they can support themselves.
The problem with term life insurance with a constant face value is the premium cost.
As the insured ages, the premiums rise every 5 or so years. Up to about age 50, the rates are fairly good. After that, they can rise significantly with the completion of each term. Term insurance can be sold in 5 year, 10 year, or other offered time frames or terms. This signifies the length of time before premium reviews occur. By age 70, most of these types of term life insurance policies are becoming far to costly for a retiree to maintain.
Credit life insurance is a form of decreasing term life insurance.
When buying a house, car, or other large item, credit life insurance can be attached to the monthly payment. This insurance will pay off the balance of the loan in the event of the death of the borrower. In this way, the debt will not be passed to the estate. Some banks require this type of insurance or a term policy with the bank as the beneficiary to protect their investment. As the loan is retired, the policy value decreases. The idea is to have the insurance amount and the loan to equal zero at the same time.