term life insurance

Definition

Simplest and usually the cheapest type of life insurance that stays in effect for a specified period or until a certain age of the insured. It pays the face amount of the policy in case the insured dies within the coverage period (term) but pays nothing if he or she outlives it. Also, (unlike in whole life insurance) whereas it premium cost is low in younger years, it generally increases rapidly with the age of the insured. Term life insurance is used commonly as an insurance cover for a loan repayment or post-death liabilities such as estate taxes.