Term life insurance provides coverage at a fixed premium for a limited period of time known as the coverage period. If the insured dies during the term (or coverage period), the death benefit will be paid to the beneficiary.

After the coverage period expires, coverage at the previous rate of premiums is no longer guaranteed.  At this point, the insured can choose to forgo coverage. They may also elect to continue coverage or transfer coverage, with different payments and/or conditions.

Term Life Insurance is made up primarily of three components:

Fixed premiums: Premiums will not change during the term coverage period.

Renew-ability: A level term policy will often allow the coverage to continue past the original coverage period of the policy. Each time the policy is renewed the premium increases to the amount for the then attained age of the insured. (This provision is usually offered but may vary depending on the type of policy).

Convert-ability: Most term policies are convertible to age 75 in most states. Conversion allows the policyholder to exchange a term life insurance policy for any permanent life insurance policy offered by the insurer (subject to established policy restrictions).

Since term insurance can be purchased in large amounts for a relatively small initial premium, it is well suited for short-range goals such as life insurance coverage to pay off a loan, or providing extra life insurance protection during the child-raising years. Term insurance is the most inexpensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis.

Term insurance functions in a manner similar to most other types of insurance in that it satisfies claims against what is insured if the premiums are up to date and the contract has not expired. Like auto or home, Term life insurance is purely risk protection. 

The two most common types of term life insurance are:

Annual renewable term is for a term of one year. The death benefit would be paid by the insurance company if the insured died during the one year term, while no benefit is paid if the insured dies one day after the last day of the one year term.

Level term life insurance is guaranteed level premium term life insurance, where the premium is guaranteed to be the same for a given period of years. The most common terms are 10, 15, 20, and 30 years.