In life insurance, what is a "term policy"?

A term policy in life insurance is specifically designed to provide coverage for a specified duration or period of time. This means that if the insured individual passes away during this set time frame, the policy pays out a death benefit to their beneficiaries. Term policies are typically more affordable compared to permanent insurance options because they do not build cash value and only provide a death benefit for the coverage duration.

The nature of a term policy makes it a straightforward option for those looking for temporary insurance needs, such as covering a mortgage or providing for dependents until they are financially independent. The policy will expire at the end of the specified period unless renewed, making it distinct from permanent insurance which remains in force for the lifetime of the insured and often accumulates cash value.