What is term life insurance?
Term life insurance covers you for a fixed period, commonly 10, 20, or 30 years, and pays the death benefit to your beneficiary only if you die during that term. The Maryland Insurance Administration’s guide says it generally offers the largest protection for your premium dollar and generally builds no cash value. Premiums are usually level for the term and rise if you renew afterward. It fits a need with an end date: the years your children are at home, the years you owe on a mortgage, the years until retirement.
What you get, and what you do not
The Maryland guide answers the question plainly: when you buy term insurance you have bought the company’s guarantee that if you die during the term, it pays the death benefit to your beneficiary. If you outlive the term, the policy pays nothing, the same way your auto or homeowners policy pays nothing in a year without a claim. The guide notes that agents sometimes call term “temporary” for that reason, and that it is no more temporary than those policies.
The NAIC adds one point people forget: once a policy is issued, the company cannot cancel it because your health changes. As long as you pay the premium, the coverage stays.
Level, decreasing, renewable, convertible
The NAIC lists the common structures. Level term keeps the death benefit and the premium fixed for the whole term, typically 10, 20, or 30 years, even if your health changes. Decreasing term has a benefit that shrinks over time, often matched to a mortgage balance. Renewable term lets you extend coverage at the end without proving your health again. Convertible term lets you exchange the policy for a permanent one, and premiums are usually a little higher for that option.
Some policies offer return of premium, which refunds part or all of what you paid if you outlive the term; the NAIC notes those cost more. Most policies sold in Maryland combine several of these features, so ask which ones yours has.
| Version | What changes over time | Typical use |
|---|---|---|
| Level term | Nothing: benefit and premium stay fixed for the term | Income replacement while children are young |
| Decreasing term | The benefit goes down on a schedule | A debt that shrinks, such as a mortgage |
| Renewable term | You can extend at the end, at a higher premium, without a new exam | Keeping coverage if the need outlasts the term |
| Convertible term | You can switch to a permanent policy by a deadline without a new exam | Keeping lifetime coverage if your health changes |
How long a term to choose
Match the term to the need. Count the years until your youngest child is independent, until the mortgage is paid, or until retirement savings could replace your income, and choose the term that covers the longest of those. A term that ends five years early leaves you buying new coverage at an older age and, the Maryland guide warns, term premiums increase as you get older to keep up with the cost of insurance.
A longer term costs more per month but locks the price for longer. Many Maryland families choose 20 or 30 years for exactly that reason. The cost guide on this site explains what drives the premium.
What happens at the end of the term
Most term policies can be renewed for one or more terms even if your health has changed, but each renewal premium may be higher, and the Maryland guide tells you to ask two things now: what the premiums will be if you keep renewing, and whether you lose the right to renew at a certain age. For a higher premium, some companies guarantee the price for a set period; after that you may need a medical exam to continue.
Conversion is the other exit. During the conversion period you may be able to trade the term policy for a cash-value policy without proving your health, at the higher premium of the new policy. That right has a deadline; write it down.
- What is the renewal premium at the end of the term, and at what age does renewal end?
- Until what date can I convert, and to which permanent policies?
- Is the conversion right guaranteed in the contract or only a current practice?
“Buy term and invest the difference”: what the Maryland guide says
Term’s low early premium makes it tempting to buy term and invest what a permanent policy would have cost. The Maryland guide says it depends on your goals, resources, and the policy terms, and lists the things to weigh: term premiums rise as you age, investing the difference could pay those higher costs later, spending the difference could leave you dipping into savings, and if your health declines you may not be able to buy a new policy at all.
The guide also flags a sales tactic to be careful with: switching term companies every couple of years for promotional rates restarts a two-year contestability period each time, during which the company can investigate your application answers and refuse to pay if they were inaccurate.
Questions to ask before you apply
Take these to Paola or to any licensed producer, and ask for the answers in writing. Health details, your date of birth, and payment information go only into the carrier’s application, never into this website’s contact form.
Before signing, the Maryland Insurance Administration’s advice applies: verify the agent and the company are licensed with the MIA, review every answer on the application for accuracy, and make the check payable to the company.
- Is the premium level for the entire term, and is that guaranteed?
- Is the policy renewable and convertible, and by when?
- Which riders are included, and what does each add to the premium?
- What is excluded, and what is the contestability period?
- How long does the company take to pay a claim, and what does the beneficiary need to file?
Primary sources
This guide is based on the following official consumer resources. Your loan documents, your lender’s requirements, and the law that applies decide your individual situation.
About the author
Paola Sharleen Valdez · Licensed Maryland Insurance Producer · NPN #18429595
Paola Sharleen Valdez is a licensed Maryland insurance producer. She writes these guides to explain insurance concepts in plain language; choosing a policy, underwriting, issuing it, and every transaction happen with the insurance carrier, not on this website.