What is term life insurance?
Term life insurance pays a death benefit to your beneficiaries if you die during a set term, usually 10, 20 or 30 years. It is the simplest and cheapest form of life insurance for most people.
How it works
You pay a premium for a set period. If you die during the term, the insurer pays the benefit.
When to buy it
- You have dependents who rely on your income.
- You have debts that would fall on someone else.
- You want coverage until the kids are independent or the mortgage is paid.
FAQ
How much coverage do I need?
A common starting point is ten times your annual income, adjusted for debts, dependents and savings.
What happens when the term ends?
The coverage ends. You can usually renew at a much higher rate or convert to a permanent policy if the contract allows.
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First time home buyer steps from budget to closing
Before viewing homes, review income, debt, savings, credit, and the full monthly cost of ownership. A mortgage payment is only one component; property taxes, homeowners insurance, mortgage insurance, HOA dues, utilities, maintenance, and repairs may also apply. A debt to income ratio calculator provides a planning estimate, but a lender’s underwriting rules determine how debts and income are treated for a loan application.
Mortgage preapproval can help define a conditional financing range, but it is not final approval or a requirement to spend the full amount. Compare loan estimates from lenders, including the interest rate, annual percentage rate, points, lender fees, cash to close, and projected payment. An offer may involve earnest money, inspection terms, financing conditions, appraisal issues, and title review. Escrow and title insurance serve different purposes and should be reviewed separately.
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