What is a key characteristic of term life insurance?

Term life insurance is characterized primarily by its provision of coverage for a specified period. This means that the policy is designed to protect the insured for a predetermined duration, which can range from one year to several decades. If the insured passes away during this term, the death benefit is paid to the beneficiaries. If the term ends while the insured is still alive, the coverage simply expires, and there is typically no payout or cash value associated with the policy.

This feature distinguishes term life insurance from other types of life insurance, such as whole life or universal life insurance, which do build cash value over time and provide lifelong coverage, as long as premiums are paid. The purpose of term life insurance is primarily to provide financial security for a specific timeframe, such as during the years when dependents are financially reliant on the policyholder. Understanding this fundamental characteristic helps clarify why term life insurance can be a suitable option for individuals seeking temporary protection without the complexities of a cash value accumulation.