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What is term life insurance?

Term life insurance provides coverage for a specific period of time, known as the term. Term life insurance is often referred to as temporary insurance or pure insurance because there is no cash value, only death benefit protection. You can typically buy term life insurance for a coverage period of between 1 and 30 years. If you die during the policy term, your beneficiary would receive a death benefit equal to the face value of the policy. If you don't die during the policy term, your beneficiary would receive nothing, and your coverage simply ends. At this point, you can either renew your existing policy or purchase a new policy to maintain the same coverage.

Term life insurance is less expensive to purchase than permanent insurance (such as whole life, variable life, or universal life) during your early years. However, the cost of term insurance typically goes up as you get older or as your health declines. Thus, term insurance may actually cost you more if you want long-term coverage, since you will need to purchase a series of increasingly expensive policies to maintain coverage throughout your life. And when you reach age 65, you may find it difficult to find an insurance company that will give you a term policy for more than 10 years, and it will be very expensive.

Note: Variable life insurance and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional of the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or variable universal life insurance policy.

There are many times, however, in which term insurance may be the most appropriate choice. If you have a great need for insurance but limited resources, you should consider term insurance. For example, a young family may need a great deal of income to cover living expenses and educational needs if the breadwinner should die. Term insurance would allow the family to buy insurance protection with limited cash outlay. Term insurance is also appropriate if you need coverage only for a limited period, such as while your children are in college, or while your business is in its start-up phase.