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Term life insurance is the original form of life insurance and is considered to be pure insurance protection because it builds no cash value. This is in contrast to permanent life insurance such as whole life, universal life, and variable universal life.

Term life insurance is temporary, as it covers only a specific period of time, the relevant term. If the insured dies during the term, the death benefit will be paid to the beneficiary. Because the term expires the insurer often does not have to pay out making term insurance the most inexpensive way to purchase a substantial death benefit on a coverage per premium dollar basis.

Because term insurance is temporary in nature its primary use is generally to provide for covering temporary financial responsibilities of the insured. Such responsibilities may include but are not limited to consumer debt, dependent care, college education for dependents, and mortgages.

Annual renewable term
The simplest form of term life insurance 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. The premium paid is then just the expected probability of the insured dying in that one year plus a cost and profit component for the insurer. Since the likelihood of dying in the next year is low for anyone that the insurer would accept for the coverage, purchasing one year of coverage is not generally done, nor cost effective. The main problem with this type of coverage is that the insured could acquire a terminal illness within the year, but not die until after the term expires. Because of the terminal illness, the purchaser would likely be uninsurable after the expiration of the initial term, and would be unable to purchase a new policy. A variant that is commonly purchased is annual renewable term (ART). In this form, the premium is paid for one year of coverage, but the policy is guaranteed to be able to be continued each year for a given period of years. This period varies from 10 to 30 years, or occasionally until age 95. As the insured ages the premiums increase accordingly and later becomes financially unviable as the rates for a policy would eventually approach the face amount. In this form the premium is slightly higher than for a single year's coverage, but is much more likely for the insured to have the benefit paid.

Level term
Much more common than annual renewable term insurance is insurance where the premium is the same for a given period of years. The most common periods being 10, 15, 20, and 30 years. In this form, the premium paid each year is the same, and is the cost of each year's annual renewable term rates averaged over the term, with a time value of money adjustment made by the insurer. Thus the longer the term the premium is level for, the higher the premium, because the older, more expensive to insure years are averaged into the premium.

Most level term programs include a renewal option and allow the insured to renew for a maximum guaranteed rate if the insured period needs to be extended. This would be used if the health of the insured deteriorates significantly during the term.

A policy with a set duration limit on the coverage period. Once the policy is expired, it is up to the policy owner to decide whether to renew the term life insurance policy or to let the coverage terminate. This type of insurance policy contrasts with permanent life insurance, whose duration extends until the policy owner reaches 100 years of age (i.e. death).

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