Term life insurance is a type of policy that is paid for during a specific period of time, at a set price, that will pay benefits only during the time period paid for. It is one of the easiest types of life insurance policies that can be purchased, and it is obtainable to people that would otherwise not be able to afford, or qualify, for a life policy. The one major problem with term insurance is that after the set period of time expires, the policy is no longer valid and will not pay in the case of a death to the policy holder. It can usually be extended, though, up until the policy owner reaches a certain age so the money invested will not be a total loss. After this age limit the policy holder will then be disqualified from the term life insurance policy, and thus will forfeit any and all of the money that has been paid into it.

The way that a term life insurance policy works is that the policyholder simply pays a set amount for a specified amount of time. For instance, a policy that is set into place for ten years will require premium payments to be made for the length of the policy. If a death to the owner of the policy should occur during those ten years, then the policy benefits will be paid to the beneficiary of it. If the owner remains alive after ten years, then they will not be paid any benefits unless the policy is renewed and payments are once again made for the specified amount of time. As can be expected, each time that the policy is reinstated the payments will increase because the age of the owner increases.

Even though this type of policy may seem like a wasted investment, it is specially suited for many different people. For instance, a young adult that is going through college and cannot afford a whole life insurance policy. In this way, the student can have a life insurance policy that is affordable while they work through college and can then invest in more long-term policies later on. Term policies also work well as a secondary life insurance source for people that want more coverage, such as business owners that may need a substantial amount of income if they pass away in order to pay off the debts incurred by the business.