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Term life insurance is a type of life insurance that lasts for a set period of time, or the term. The term can last anywhere from up to 40 years. For example, if you’ve chosen a term life policy of 20 years, your beneficiaries receive your death benefit if you die during that time as long as you continued to pay the premiums. 

There are various types of term life insurance policies. Some term life insurance policies have a decreasing death benefit, while others may refund you a portion of the premiums once the term expires. 

However, Loretta Worters, vice president of media relations at the Insurance Information Institute, or III, says most people buy level term — which is the most straightforward and affordable type of term life insurance.

Level term life insurance

Level term life insurance is the most common and popular type of term life insurance. You lock in a rate when you apply for a policy, and that is the premium that you pay for the duration of the policy. 

Level term life insurance is the easiest to manage because you don’t have to worry about making any major changes to the policy during its term. And if you die during the policy’s term, your beneficiaries will get the amount of coverage you signed up for — as long as you paid the policy’s premiums.

Level term life insurance policies are the most affordable and provide the most straightforward financial security for your loved ones. 

Return of premium term life insurance

With a return of premium policy, the insurer returns the premiums at the end of the term. But unfortunately, there’s a catch: Insurers charge much higher premiums for these policies, and you’ll still end up paying more for coverage even with the premiums you’re returned. Additionally, you might not get all of the money back.

“Some policies will return the base premium but not the extra premium for the return benefit, and others will return both,” Worters says.

Instead, consider getting term and investing the difference. 

Decreasing term life insurance

Decreasing term life insurance is a renewable policy where the coverage decreases over time, but the premiums remain constant. 

“With a term life insurance policy with a decreasing term, coverage decreases,” says Mark Hill, director of life marketing at MassMutual. “These types of policies are generally used to cover loans.” 

This policy may interest you if you believe you’ll be better off financially in the future or will have fewer debts, but a level term policy will provide more coverage for a similar price. 

Modified term life insurance

Modified insurance plans have premiums that change over time, usually in five- to 10-year intervals. The protection is the same, but the premiums increase.

For instance, you may initially dish out $12 a month for your term life policy. Then, in five years, premiums jump to $16 per month.

Modified insurance would appeal to someone who doesn’t have much money for insurance now, but likely will in the future — for example, people with kids or a new graduate who hasn’t landed their dream job yet.

Convertible term life insurance

Most term life insurance policies can be converted to permanent coverage during the term period up to a certain age

“This means that the policy’s owner has the right to change it into a permanent type of life insurance without additional evidence of insurability,” Worters says.

If, at the end of your policy’s term, you find that you still need life insurance, converting your policy is a good option. Because you don’t have to prove evidence of insurability, you can extend your coverage even if your age or health would have made you otherwise ineligible for coverage.

Check if your policy is convertible with your provider before finalizing your policy. Once a policy is active, riders can’t be added on.

Which type of term life insurance is best for you?

Level term life insurance is the best option for most people because it offers straightforward, affordable coverage. The coverage amount stays the same throughout the policy’s term, and the death benefit matches what you pay for. Compared to the other types of term life insurance, you’ll get the most bang for your buck with a level term policy.

Level term life insurance policies can come in the form of no-medical-exam insurance and online life insurance, as well. 

However, there’s no one-size-fits-all term life insurance policy and you should talk to an advisor or financial planner to get a policy that matches your specific needs.

Once you have a game plan in place, make sure to compare companies. Rates vary for each insurer, so compare quotes and coverage. Check out Insure’s best life insurance companies to see who’s editors recommend.

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Nupur Gambhir
Managing Editor


Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.