What is the purpose of purchasing term insurance?

Term insurance is specifically designed to provide coverage for a specified period, which means its primary purpose is to offer financial protection and peace of mind during that time frame. When individuals purchase term insurance, they ensure that their beneficiaries will receive a death benefit if the insured person passes away within the term of the policy. This is particularly valuable for families or individuals who want to ensure that their loved ones are financially secure during critical life stages, such as raising children or paying off debts like a mortgage.

The characteristics of term insurance clearly delineate it from other types of insurance products. Unlike permanent life insurance options, term insurance does not accumulate cash value or provide investment components. Therefore, the notion of receiving cash back at the end of the term does not apply here, as term insurance generally concludes without any payout or investment growth unless a claim is made.

Similarly, term insurance does not guarantee lifetime coverage—coverage lasts only for the designated term period, after which the insured has the option to renew or convert to a permanent policy, often at a higher premium due to age or health changes. This emphasizes that its purpose is specifically for temporary protection and financial assurance during that limited timeframe.