Term life insurance, explained by a Phoenix agent
Jodi MorrisAZ License 1461741First licensed in Arizona in 2001Property, Casualty and LifeServing Phoenix and the East Valley
Term life insurance covers you for a set number of years, usually at a level premium. If you die within the term, it pays the people you name; when the term ends, the coverage ends unless you renew or convert it. It is usually the lowest cost way to cover a need with an end date. I'll help you pick the amount and the term.
How a term policy runs, start to finish
Four stages, and the one that decides most of what happens later is the first: the application.
- 1
You apply
Health questions, answered truthfully
- 2
The policy starts
Usually a level premium for the term
- 3Covered
Within the term
It pays the people you name if you die
- 4
The term ends
Renew, convert, or let it end
For the first two years a policy is in force, the insurer can contest it over a material or fraudulent misstatement on the application, under Arizona law. A guess about your health that turns out wrong can cost your family the claim, so answer every question fully and ask me when you are unsure what one means.
Most term sold today is level term: the amount stays the same for the whole term and the premium usually does too. How term compares with permanent coverage is laid out on the life insurance page, and in what indexed universal life insurance is.
Picking the length of the term
Pick a term that outlasts the longest need on this list. A term that ends too early can leave you shopping for new coverage when you are older, when it costs more and your health may have changed.
The amount comes from a different sum: what the people who depend on you would need. The life insurance page works through it line by line.
Children at home
The years until your youngest is grown and supporting themselves.The mortgage
The years left on the loan, so the family is less likely to lose the home.A business loan
The years a lender or a partner would be exposed if you were gone.Your working years
The years your income carries the household, until savings are meant to take over.
When the term ends: three paths
What your policy lets you do at the end is set on the day you buy it, so read this part before you sign, not years later.
Your term ends
The policy says which paths are open to you
Renew it
Another term without new health evidence, if the policy is renewable, at a premium based on your age then
Convert it
Exchange it for permanent coverage without health evidence, within the conversion period, at your age then
Let it end
The coverage stops; nothing comes back unless the policy has a return of premium feature
Coverage through work, or a policy of your own
Many people have some life insurance through their job. It helps, but it is risky to count on it alone.
Group coverage through work
- Often offered as a workplace benefit, sometimes with extra supplemental coverage on top
- The amount is usually set by the plan, often tied to your pay
- It usually ends when you leave the job
A term policy of your own
- You choose the amount and the length of the term
- It stays in force whatever job you hold, as long as the premiums are paid
- You apply for it, usually with health questions
What sets the price, and what to have ready
What sets a term premium
- Your age when you apply
- Your health and history
- Whether you use tobacco
- The amount of coverage
- The length of the term
Some of these you bring and some you choose. The life insurance cost guide goes through each one.
Before you apply
- The amount you worked out, line by line
- The term that outlasts your longest need
- Each beneficiary named in full, plus a contingent one
- What coverage you already have, including through work
- True, complete answers to the health questions
Not sure where to start? My answers to common insurance questions are a good first stop.
Not sure how long a term you need? Tell me what it has to cover and I'll lay out the options.
Questions people ask about term life
How does term life insurance work?
You pay a premium, usually the same amount each year, for a term you choose. If you die within the term, the policy pays the amount on it to the people you name. If you outlive the term, the coverage ends unless you renew or convert it, and nothing is paid back unless the policy has a return of premium feature.
What happens when a term life policy ends?
One of three things. A renewable policy can continue for another term without new health evidence, at a premium based on your age at renewal, which is usually higher. A convertible policy can be exchanged for permanent coverage within the conversion period it sets. Otherwise the coverage simply stops.
Can I convert term life insurance to permanent coverage?
If the policy is convertible, yes: you can exchange it for permanent coverage without evidence of your health, within the conversion period the policy sets, at a premium based on your age when you convert. Check the last date to convert before you need it.
Does term life insurance build cash value?
No. Term life is pure protection: there is no cash value to borrow against or cash in. That is a large part of why it costs much less than permanent coverage, such as indexed universal life, for the same amount of coverage.
Is term life insurance worth it?
For a need with an end date, such as children at home or a mortgage, it is usually the lowest cost way to cover it. Whether it is worth it for you depends on who would be hurt financially if you died, and for how long.
How long should a term life policy be?
Long enough to outlast the longest need it covers: the years until your youngest is independent, the years left on the mortgage, or the years your income carries the household. A term that ends too early can leave you buying new coverage when you are older and it costs more.
More on the life insurance page, in what life insurance costs and in what indexed universal life insurance is.
Let's pick the right term for your family
Tell me what's going on and I'll take it from there. Or just call me.
Arizona Insurance Producer License No. 1461741 (NPN 1461741)