What Is Term Life Insurance?

Term life insurance is a type of life insurance that provides coverage for a specific period—typically 10, 20, or 30 years. During this term, the policy pays a death benefit to your beneficiaries if you pass away. It’s designed to offer financial protection when you need it most—often during your prime working years or while raising a family.

Because term life insurance is temporary and doesn’t build cash value like permanent insurance, it tends to be the most affordable option. For many individuals, it serves as an entry point into life insurance coverage without requiring a long-term financial commitment.

How Term Policies Work

A term policy offers coverage for a defined time period. You pay regular premiums throughout the term. If you pass away during the coverage window, the insurer pays out a lump-sum benefit to your beneficiaries. If you outlive the policy, coverage ends and no payout occurs—unless your policy includes a return of premium features.

Some term policies are renewable or convertible, allowing you to extend or upgrade coverage without a medical exam. However, premiums may increase with age upon renewal.

Benefits of Term Life Insurance

• Lower premiums than permanent policies
  Term life insurance offers maximum coverage at a low cost, making it budget-friendly for most households.
  
• Simple structure
  With no cash value component, the policy is easy to understand—just coverage for a set number of years.
  
• Customizable term lengths
  Choose from 10, 15, 20, 25, or 30 years to match your financial obligations.
  
• Convertible to permanent life coverage
  Many term policies include a conversion option, allowing you to shift into permanent insurance later without requalifying.
  

Who Should Consider a Term Policy?

A term policy is ideal for individuals with temporary financial responsibilities, such as:

• Parents with young children
  To ensure your family’s financial security until children become independent.
  
• Homeowners with a mortgage
  Coverage can align with your mortgage term, protecting your home for your loved ones.
  
• Individuals needing affordable coverage
  For those who want protection now but may revisit long-term planning later.
  

Types of Term Life

Level Term

Level term life policies provide consistent premiums and a fixed death benefit for the entire term. This predictability makes it the most popular form of term life insurance.

Decreasing Term

The death benefit decreases over time, often aligned with a shrinking financial obligation like a mortgage. Premiums may remain level, and the policy is usually more affordable than a level-term policy.

Renewable Term

Renewable term insurance allows you to renew the policy annually without a medical exam. Each renewal comes with an increase in premium based on your age, making it suitable for short-term or transitional needs.

Convertible Term

This policy includes a conversion option, letting you switch to a permanent life insurance policy without a new health screening. It’s ideal if you anticipate needing lifelong coverage but aren’t ready to commit now.

Return of Premium

If you outlive your policy term, you receive a full refund of the premiums paid. Though premiums are higher, the risk of “wasting money” is eliminated.

Annual Renewable Term (ART)

Designed for year-by-year flexibility, ART policies renew annually. Premiums start low but increase with each renewal. Great for temporary coverage gaps.

Group Term Life

Often offered through employers, this insurance provides basic group coverage at little or no cost to the employee. It’s typically not portable if you leave your job.

Term vs. Whole Life Insurance

Term life insurance is temporary and purely protection-based, while whole life insurance offers permanent coverage and builds cash value. Term insurance is generally cheaper and ideal for time-bound financial responsibilities. Whole life, though more expensive, includes investment and lifelong death benefit features.

How to Choose the Right Term Policy

Consider the following when selecting a term policy:

• Budget – Determine what monthly premium fits comfortably within your financial plan. Understand what benefits you can afford with your income.
  
• Term length – Align the term with major milestones—e.g., years until retirement or mortgage payoff.
  
• Health status – Younger, healthier individuals qualify for lower rates. Lock in a term while you’re insurable.
  
• Long-term goals – Decide if you’ll eventually want permanent coverage. If so, choose a convertible term policy.
  

Get a Free Term Life Insurance Quote

Take steps to protect your family today with a personalized term life insurance quote from us at Central Oregon Life Insurance (COLI). Our licensed agents can help you compare coverage options and products and find a term policy that fits your budget and future goals.

FAQs: Oregon-Specific Regulations and Your Rights

❓ Do I have a free look period in Oregon?

Yes. In Oregon, you have a 10-day free look period for new policies, and a 30-day free look period if you’re replacing an existing or current policy. During this time, you may cancel your policy for a full refund. (See OAR 836-080-0029 for more details.)

❓ What is the “incontestability” clause?

Under ORS 743.168, after two years in force (except in cases of fraud), your insurer cannot cancel the policy for errors made in the application. This protects you once the initial contestability period has passed.

❓ Are surrender penalties disclosed?

Yes. Oregon law requires all surrender penalties and associated fees to be clearly disclosed in the contract. (Refer to ORS 742.023(1)(f))

❓ Are there protections for seniors in Oregon?

Yes. Oregon law places an extra duty of honesty, good faith, and fair dealing on insurance agents dealing with consumers aged 65 or older. (Refer to the Oregon Insurance Division guide, publication #440-4106.)

❓ What if I’m denied coverage?

You have the right to request a written explanation for any denial of coverage under ORS 746.075.