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How term life insurance works

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  1. The premiums you "pour in" are based on your age and health, as well as the amount of death benefit and the length of time, or term, the insurance coverage will remain in force. Your premiums will generally remain the same during the term of the policy.
  2. As you pay your premiums, the insurance company deducts all of its expenses, premium taxes, and the cost of pure insurance, or death benefit.
  3. The insurance does not build any cash value. The amount of pure insurance coverage, or death benefit, remains the same over the term of the policy.
  4. If you die during the term of the policy, the insurance company will pay the death benefit to the beneficiary named in the policy.
  5. If you live beyond the term of the insurance, the coverage ends and generally neither you nor your beneficiary receives anything from the company. However, you may renew the term of the insurance, but your premiums will likely be much greater due to your increased age.