ELI5: term insurance

// eli5

What is term insurance?

Term insurance is like renting protection for your family instead of buying it forever [2]. You pay a small amount each month, and if something happens to you during that time period, your family gets money to help them [2].

Why is it cheaper than other insurance?

Term insurance only protects you for a certain number of years—like 10, 20, or 30 years—instead of your whole life [2]. Because the insurance company takes less risk, they charge you way less money—sometimes as low as $21.25 a month [1].

What happens when the term ends?

If you don't pass away during your term, the insurance stops and you don't get any money back [3]. It's like paying for temporary protection that you hopefully won't need to use.

Who should get it?

Term insurance is the best choice if your family depends on your income right now and needs protection while your kids are young [3]. Once your kids grow up and you've saved enough money, you might not need it anymore.