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Term & Whole Life Insurance

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Key Takeaways
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Term life insurance is the simplest and most affordable form of life insurance. It provides pure death benefit protection for a specified period — the term — with no cash value or savings component.

Timeline showing term life coverage period with death benefit
Figure 1: Term life pays the death benefit only if the insured dies within the policy term.

How Term Life Works

The insured selects a face value (coverage amount) and a term length. If the insured dies within the term, the insurer pays the death benefit to the named beneficiary tax-free. If the insured survives the term, the policy expires with no payout and no cash value returned.

  • No cash value — there is no savings or investment component
  • Level premiums — the premium amount does not change during the term
  • Coverage ends at the expiration of the selected term period
  • Lower cost than permanent insurance for an equivalent death benefit amount
  • Sometimes called 'pure death protection' — exactly what appears on licensing exams
Exam Tip

Term life is frequently called 'pure death protection' on licensing exams because it provides ONLY a death benefit — no savings, no cash value, no investment component whatsoever.

Common Term Lengths

  1. 10-year term — short-term needs, small mortgage payoff, bridge coverage
  2. 20-year term — most popular; covers peak income years and children's dependence
  3. 30-year term — long-term needs, young families with 30-year mortgages
  4. Level term — premium stays the same for the entire chosen term period

Renewability and Convertibility

Renewable Term
The policy may be renewed at the end of the term without evidence of insurability (no new medical exam required). The premium will increase at each renewal because it is based on the insured's attained age at renewal.
Convertible Term
The policy may be converted to a permanent policy (such as whole life or universal life) without evidence of insurability, up to a specified conversion date or age specified in the policy.
20yr term
Most popular term length purchased in the U.S.

The 20-year term covers most of a family's peak financial obligation years — mortgage balance, children's education costs, and income replacement needs.

Key Takeaways
  • Term life provides a death benefit only for a fixed period with no cash value accumulation
  • Premiums are significantly lower than permanent insurance for the same coverage amount
  • Renewable term: renewal without medical underwriting (at a higher age-based premium)
  • Convertible term: conversion to permanent insurance without medical underwriting
  • Term life is also called 'pure death protection' — this phrase is commonly tested