Term Life Insurance
Term life insurance is the original form of life insurance and is considered to be completely 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, which is the relevant term. If the insured person dies during the term, then the stop 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 stop benefit on a coverage per premium dollar basis.
Much more common than the 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. Therefore, the longer that the term the premium is level for, the higher the premium, because the older, more expensive to insure years are averaged into the premium.