What does term life insurance specifically cover?

Term life insurance is designed to provide coverage for a predetermined period, typically ranging from one year to several decades. The key feature of this type of insurance is that it pays a death benefit only if the insured passes away during the specified term of the policy. If the insured lives beyond that term, the coverage ends, and no benefits are paid out. This structure offers affordable premiums compared to permanent life insurance products, which include features like cash value accumulation and provide coverage for the insured's lifetime.

The reason this coverage is structured in such a way is to balance risk for the insurer; they only pay out benefits if the death occurs during the term, making it a straightforward product primarily aimed at providing financial protection for a specific duration, typically to cover needs such as mortgage payments, education expenses, or income replacement during working years.