Term life insurance is the simplest type of life insurance, only covering a specified period. Commonly used by young adults and other workers as income replacement in case of death, term life policies pay large death benefits at low premium rates.
While term life is a strong choice for young adults, seniors may have difficulty finding term life coverage. As experts in life insurance, Final Expense Benefits can help you determine if term life insurance works for your needs.
To learn more about life insurance, call us at (866) 786-0725 Monday through Friday, 9 a.m. to 5 p.m. ET, or check our free online quoting tool for a personalized pricing estimate.
Key takeaways
Term life insurance covers for a set time period, usually 10 to 30 years.
Benefit payouts are large, ranging from $100,000 to over $5 million.
Rates are low for young adults but climb with applicant ages.
Term life health requirements are strict, often excluding seniors from coverage.
How Term Life Insurance Works
Term life insurance covers a set period, and coverage ends once the term ends. Typical terms are 10, 15, 20, 25, and 30 years, though some providers offer terms up to 40 years. If the policyholder dies during this period, their beneficiaries will receive the policy’s benefit payout. However, if the policyholder outlives the term, then there is no payout.
Term life insurance rates are typically low, sometimes as low as $10 per month, but this depends on your personal health and desired coverage value.
Term life payouts generally range from $100,000 to over $5 million. Benefit payouts are large because experts typically recommend policyholders purchase death benefits equal to 10 times their yearly income, if they are using term life as income replacement.
Because of the large payouts and inexpensive rates, term life has strict medical underwriting requirements. Applications ask about health and may require a medical examination to verify health status. Insurers will likely investigate your health on your Medical Information Bureau report. Seniors are often excluded from term coverage because of these restrictive requirements.
Types of Term Life Insurance
Life insurance companies offer a few term life insurance options, with level term being the simplest and most common. Here are all the different types of term life insurance and how they work:
- Level term life
The most common type of term life insurance, level policies offer death benefits and premium rates that stay the same throughout the policy’s duration. - Convertible term
Convertible term life policies allow the policyholder to convert their term policy into permanent coverage at the end of the term. Most level term policies are also convertible.
- Return-of-premium (ROP) term
ROP policies return all or a portion of paid premiums to the policyholder if they outlive the term. This guarantees a payout, but rates may be more than double those of comparable level term policies. - Increasing term life
Also known as incremental term life insurance, these policies have death benefits that increase over time, but often cost more than level policies.
- Decreasing term life
Payouts for decreasing term policies decrease over time. These plans are often used as a safety net for covering mortgages and other loans.
- Annual renewable term life
Also known as yearly renewable term policies, these plans last for one year and must be renewed to continue coverage. However, rates increase when the policy is renewed.
Pros and Cons of Term Life Insurance
Pros
- Inexpensive
Term life policies are typically inexpensive for young adults. - Customizable
Term life insurance is available in a few different types, and each covers different financial needs, from use as an income backup to mortgage protection. Most policies offer a variety of life insurance riders to customize coverage. - Large death benefits
With benefits ranging from $100,000 to over $5 million, term life offers significant payouts and plenty of high-value options.
Cons
- Expires at the end of the term
Policies expire at the end of their term, and if the policyholder outlives the term, then there’s no payout. - Strict health requirements
Term life health requirements are strict, and you need to be in great health to qualify for the lowest rates. - Medical exam
Most term life providers require applicants to take a medical exam to verify health status. - Not ideal for seniors
Term life works well for young adults, but isn’t as well-suited to seniors.
Who Should Get Term Life Insurance?
Term life insurance is best for young adults, newlyweds, parents, and others who need to ensure bills like mortgages are covered. Term life’s large, lump-sum, tax-free benefits are best used to cover major expenses like household bills.
We normally recommend that seniors avoid term policies for two main reasons. First, thanks to strict health requirements and unfavorable underwriting practices, they likely won’t be eligible for good rates.
Second, term policies don’t match seniors’ life insurance needs. They normally use life insurance to cover end-of-life expenses like funeral and cremation costs. While term life payouts offer more than enough to cover these expenses, seniors usually don’t need such large benefit payouts.
The other main type of life insurance, whole life, is a quality choice for seniors that we often recommend. Here’s why:
Term vs Whole Life Insurance
Term life works well for younger people, but we typically recommend that seniors get whole life or burial insurance to cover their end-of-life expenses. Here are some of their key differences:
How Much Is Term Life Insurance?
Term life rates vary depending on the insurer, medical underwriting requirements and policies, term length, and the applicant’s health. While rates are often low, they can vary wildly. Here are some sample term life insurance rates for a non-smoking applicant with no pre-existing conditions from some of our top providers for a $100,000 20-year term life policy:
| Company |
Male 30 y/o |
Female 30 y/o |
Male 40 y/o |
Female 40 y/o |
Male 50 y/o |
Female 50 y/o |
|---|---|---|---|---|---|---|
|
$23 |
$23 |
$32 |
$28 |
$57 |
$46 |
|
|
$21 |
$21 |
$31 |
$31 |
$57 |
$57 |
|
|
$22 |
$21 |
$38 |
$36 |
$79 |
$75 |
|
|
$33 |
$30 |
$44 |
$39 |
$99 |
$71 |
These figures are estimates only, based on a $100,000 20-year term life insurance policy with no applicant pre-existing conditions.
If you’re interested in learning more about your term life insurance options, contact Final Expense Benefits at (866) 786-0725 to learn more.
Final Expense vs Term Life Insurance
While term life insurance isn’t the best choice for seniors seeking coverage, final expense insurance is. Final expense is a whole life policy, so it covers you for life (as long as premiums are paid). Plus, benefits will never reduce, premiums are locked at the policy’s start, and cash value will grow.
Also called burial insurance, final expense insurance offers benefits designed to cover seniors’ needs. Average payouts range from around $5,000 to $50,000, plenty to take care of the end-of-life expenses seniors need their life insurance to cover.
Because benefits are lower than other types of whole life insurance, final expense insurance rates are low, and health requirements are relaxed. Many seniors qualify for coverage without a waiting period, even with pre-existing conditions.
Nursing home-bound seniors or those with serious health conditions like cancer and dementia can find coverage with guaranteed plans. Burial insurance offers seniors far more options than term life insurance, but how much does it cost?
How Much Is Final Expense Insurance?
Final expense insurance is affordable, ranging from around $30 to $150 monthly for most seniors, though younger seniors in good health may be eligible for lower rates. Here are sample rates from some of our top providers for a $10,000 burial insurance policy, calculated using a non-smoking applicant with no pre-existing conditions:
| Company |
Male 50y/o |
Female 50y/o |
Male 60y/o |
Female 60y/o |
Male 70y/o |
Female 70y/o |
|---|---|---|---|---|---|---|
|
$34 |
$27 |
$50 |
$40 |
$70 |
$56 |
|
|
$31 |
$26 |
$43 |
$35 |
$71 |
$53 |
|
|
$31 |
$24 |
$44 |
$33 |
$75 |
$53 |
|
|
$34 |
$29 |
$45 |
$35 |
$79 |
$59 |
|
|
$33 |
$26 |
$48 |
$36 |
$82 |
$58 |
These figures are estimates only, based on a $10,000 final expense insurance policy with no applicant pre-existing conditions.
To learn more about your final expense options, contact Final Expense Benefits. Our free online quoting tool and funeral cost calculator can help you determine how much coverage you need and how much it’ll cost.
Final Thoughts
Term life insurance is a great choice for young adults and workers seeking a financial safety net for families, but it isn’t ideal for older applicants. Seniors can qualify for term life, but they won’t have access to the large benefits and low rates that young adults enjoy.
We typically recommend that seniors get final expense insurance, a low-cost type of whole life insurance designed to cover their needs. Health requirements aren’t as strict for final expense policies, making it easy for seniors to qualify.
If you’re interested in life insurance, contact Final Expense Benefits. Our expert agents can help connect you to a great plan from over 20 of the top life insurance companies.
To get started, call us at (866) 786-0725 Monday through Friday, 9 a.m. to 5 p.m. ET, or check our free online quoting tool for a personalized pricing estimate.
FAQ
Are term life insurance proceeds taxable?
Because they’re paid into with after-tax funds, life insurance policies and their benefits aren’t taxable.
Are term life insurance premiums fixed?
Level term life insurance premiums are fixed for the entire term. Premiums may change if you’re using a yearly renewable policy or one with changing death benefits.
Are term life insurance premiums refundable?
Some policies offer a return of premium rider that partially or wholly returns premiums if the policyholder outlives the term.
Can term life be converted to whole life?
Most term life policies offer the option to convert the policy to a permanent plan when the term ends, though at a higher rate or smaller death benefit.
What is the longest term life policy?
Most insurers offer terms up to 30 years, though some offer specialized 40-year terms.
Is term or whole life better?
This depends on your age, health, and coverage needs. Young adults with larger expenses seeking to back up their income typically use term life insurance, while seniors with less expenses use whole life insurance.
Can you borrow against term life insurance?
Whole life insurance offers a cash value growth component that can be borrowed against for loans or to purchase additional coverage. Unfortunately, term life policies do not grow in cash value and can’t be borrowed against.