Term Life Insurance
Term life insurance covers a fixed period, commonly 10 to 30 years, paying the death benefit only if the insured dies during the term. It costs a small fraction of whole life per dollar of coverage, which is why most households insure large needs with term.
Term is insurance stripped to its function: a level premium buys a level death benefit for the years a family actually depends on an income, and the policy simply ends when the term does. Because there is no cash-value savings component, the same dollar of premium buys roughly 5 to 15 times more death benefit than whole life, which is what makes a DIME-sized need, often over a million dollars for a working parent, affordable at all.
Matching the term to the need is the craft: a 20-year term bought when the youngest child is born covers the dependency years, and needs that shrink over time (a mortgage paying down, college getting funded) can be laddered with two smaller policies of different lengths instead of one large one. Size the need first with the life insurance needs calculator, then shop the term that covers it.
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Related terms: DIME Method , Emergency Fund
Last updated . Part of the FinExplained finance glossary .