Term life insurance is the most common type of life insurance. You are entering into a time-based contract that in exchange for your fixed monthly payments – called premiums – the insurance company will pay a set amount to your beneficiary if you die while the contract is in place. It’s “term” because the premium amount is for a set period, say 10 or 20 years, and the premiums will never go up for the duration of the term.
If you die while your policy is in force your beneficiary gets a cheque. If you die after the policy expires (most policies expire at 80 or 85 years old), your beneficiary gets nothing; this is one of the disadvantages.
Term insurance is generally the most affordable kind of life insurance, so if you had a “short-term” need that you wanted to protect, for example, 20 year mortgage, you can take advantage of the lower cost of the term insurance.