Term life insurance policies offer insurance protection for a specified term or period of time – typically, one, five, 10, 15, 20 or 30 years, or until a specific age (such as 65) or for a handful of policies any length between 20 years and 40 years. Premiums may increase each year (annually renewable term) or remain level for a set period (level term), and the insurance is generally less expensive than permanent (cash value) life insurance.

A term life policy may contain a provision permitting it to be renewed following the end of the level-premium period, although the premium rate probably will be much higher. Some term life insurance policies include an option to convert to a permanent life insurance policy.  Wisquote generally recommends policies with strong convertabililty options, which include the option to automatically purchase a permanent policy without further underwriting if the insured should choose.  This very important provision allows people who have health changes to keep their life insurance without having to go through another physical or health review by underwriting.

Traditional term life insurance provides a death benefit only; the policies do not offer an opportunity to build cash values. A product concept known as "return of premium term" returns at the end of the level-premium period the amount of the cumulative premiums paid, if the policy is inforce. This is an alternative to traditional term life and permanent insurance products.  Mathematically, "return of premium" policies usually make great sense.

The concept of "buy term, and invest the rest" is a tried and true formula for having life insurance protection pre-retirement, and an investment strategy for retirement.  Many of our clients buy low cost term life, and invest in a Roth IRA or invest more in a retirement plan at work.  We have never seen the numbers work out better using whole life insurance in place of term for people with incomes under about $170,000.  Some higher income people ought to consider permanent life insurance plans however if they have no other investment ideas (for example, real estate or their own business).  Remember, we can sell whole life insurance here at Wisquote, we will only do so if it is the right thing to do however.

One thing to keep in mind.  The right amount of life insurance is the right amount of life insurance.  Never buy permanent life insurance if it causes you to buy less life insurance protection than you really need (see article Finding the Right Amount of Life Insurance).