What Is Short-Term Life Insurance? [How Does It Work]

If you’re considering the possibility of short-term life insurance, it is crucial to consider the advantages and drawbacks to decide whether it’s the right option. It is also essential to compare the insurance policies of different companies to find the right insurance for your requirements.

What Is Short-Term Life Insurance?

The short-term insurance policy is a life insurance policy that protects for an indefinite period, typically one year or less. It’s often utilized to fill a short-term absence in coverage, for instance, in the event of a job change or awaiting a longer-term policy to come into effect.

Short-term life insurance policies are generally cheaper than permanent policies. However, they also have fewer death benefits. This is because the insurance company takes on a lower risk since they are only required to pay an amount of death benefits for a limited duration.

How Does Short-Term Life Insurance Work?

Life insurance policies for short-term duration are similar to other kinds policy for life in how you pay premiums in exchange for insurance. While your policy remains in force, the beneficiaries receive money if you die. The primary difference lies in the time frame for which the policy runs; however, there are additional differences, too.

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What Is Short-Term Life Insurance? (And How Does It Work?)

Cassidy Horton


Ashlee Tilford

EditorFact Checked

Published: Aug 22, 2023, 3:30 pm

Editor’s Note: We receive an income from our partners’ links in Forbes Advisor. Commissions don’t affect the opinions of our editors or opinions.


Suppose you’re searching for life insurance and have seen short-term life insurance. This type of policy could be an ideal alternative if you’re looking for insurance for a short period, for instance, when you’re settling a particular debt or launching your own business.

Suppose you’re considering the purchase of a short-term life insurance policy. In that case, it is crucial to consider the advantages and drawbacks thoroughly to determine whether it’s the right option for you. You must also evaluate the policies offered by different insurance companies to determine the most suitable coverage that meets your requirements.

What Is Short-Term Life Insurance?

The short-term insurance policy is a form of life insurance policy that is a term. The insurance is offered at the option of a fixed price for a certain period, like one year, although certain companies offer short-term plans for five years or more.

The short-term life insurance policy is usually utilized to fill a need for coverage while waiting for a long-term plan to become effective or to provide protection during a life change.

How Does Short-Term Life Insurance Work?

Life insurance policies for short-term duration operate similarly to other kinds of policies for life in that you pay for premiums in exchange for insurance. If your policy remains in force, your beneficiaries will receive money if you die. The most significant difference is the length of time that the policy is in effect; however, there are additional differences.

  • Time. Short-term policies typically run for one year. However, some policies can extend the duration to five years. Traditional term life insurance policies typically come in lengths of 10, 15, 20, 25, or 30 years.
  • Premiums. Premiums are typically lower than permanent insurance policies because they do not have a cash value component. As with traditional term life policies, the premiums for short-term policies stay the same for the entire time. If the policy you’ve purchased is renewable, you can expect the prices to rise substantially with every renewal.
  • Renew. Whether or not the policy can be renewed depends on the type of short-term life insurance you have.
  • Underwriting. Short-term policies often offer more straightforward application and approval procedures, so you do not have to undergo an examination or submit detailed health-related details.

What Are the Different Types of Short-Term Life Insurance?

Every life insurance policy can be considered short-term if you do not like the coverage and decide to end the payment. It’s typically more affordable to purchase a policy made to last a shorter duration if the coverage you require is for a short period.

Here are some of the most common forms of life insurance for short-term purposes.

  • A term that is renewable for a year. It gives you the possibility of renewing every year that you require insurance. It’s a great alternative if you believe that you will only need insurance for 12 months but would like the possibility of extending the coverage if needed. The rates will rise with every renewal.
  • A term life insurance policy that’s one year in duration. This policy is twelve months long and cannot be renewed. If you want insurance after one year of coverage, it is necessary to purchase a new policy. Progressive (via Fidelity Life), Brighthouse, and Principal offer one-year term life insurance policies.
  • The five-year term life insurance policy. While many life insurance companies begin with their terms at 10, Certain companies offer five-year life insurance policies. For instance, Haven Life offers a five-year term life policy in its Haven Simple policy.

Annual Renewable Term Life Insurance

The annual renewable term life insurance policies offer coverage for a year at a time with the option of renewing the policy yearly. The cost of premiums will rise each year. However, they can be an excellent option for those who require coverage for a brief period and need the flexibility of renewing the policy every year.

Sellers of Annual Renewable Term Life Insurance

If you’re searching for companies that offer term life insurance that is renewable annually, This list is an excellent place to begin:

  • American National — ANICO Signed Term Art Policy
  • Equitable A policy of ART
  • New York Life – Yearly Renewable term policy
  • Ohio National Ohio National YRT Plus II policy
  • Securian Financial – Convertible Annual Renewable Term (CART) policy
  • USAA – Essential Term policy

Pros and Cons of Short-Term Life Insurance

Before purchasing an insurance policy, think about the benefits and drawbacks of life insurance for short-term purposes.


  • Affordable. Short-term life insurance policies are typically cheaper than permanent ones since they don’t accumulate cash value and remain available for a shorter duration. If you own a short-term insurance policy that can be renewed, the cost of premiums could quickly add up when you decide to renew your policy every year.
  • One price. You usually pay a single annual fee upfront for a single-year policy. You don’t need to worry about your policy lapse because of missed payments.
  • Rapid approval. Short-term life insurance policies are typically simplified. Life insurance policies mean you could be approved for coverage in a short time.


  • It can be costly. Your age determines the premium you pay for the insurance at the renewal date. If you need to know your insurance requirements and find yourself renewing every year, purchasing longer-term life insurance for ten years or more is much cheaper.
  • It’s not necessarily renewable. Some types of life insurance policies for short-term duration don’t have a renewable option at all. Other policies may have a limit on the amount of times you may renew. For instance, Equitable offers two short-term policies, which include an annual renewable policy with a maximum of three years and a one-year policy that isn’t renewable. Ohio National’s short-term plan has an expiration date of 10 years.
  • There is no cash value. Short-term policies don’t create cash value over time. This means you need help to draw against the policy or utilize it to build up cash as you would with the cash value life insurance policy.

How Much Does Short-Term Life Insurance Cost?

You can buy a one-year, $50,000 term life insurance plan from Progressive (via Fidelity Life) starting at just 7 dollars per month for men 30-32 and women 39-41 who don’t smoke. If you’re older than that, then the policy could be less expensive.

Several elements influence the cost you will pay for life insurance.

  • Age. The younger you are, the younger you are, the lower your insurance cost of insurance will be.
  • The amount of coverage. The more coverage you require, the more your cost.
  • Health. You might be eligible for lower costs if you’re in good health. Suppose you’re suffering from an existing medical condition that is pre-existing, which requires you to pay more costs or lose coverage completely.

When Does Short-Term Life Insurance Make Sense?

Life insurance for short-term duration might be worthwhile in these instances.

  • You’re in between jobs. Suppose you’re between jobs but need insurance. In that case, short-term life insurance will protect you until you can find an employment opportunity with group coverage, or you can purchase insurance yourself.
  • Your lifestyle is making beneficial modifications. Suppose you’re quitting smoking or any other lifestyle change that will increase your fitness (and life insurance rates). In that case, Short-term policies can cover you until you’re ready for an insurance policy with a longer time.
  • You require coverage for a short-term loan. Short-term insurance is a good option if you have particular requirements for life insurance coverage to provide temporary debt protection.

How to Choose a Short-Term Life Insurance Policy

If you want to purchase life insurance for the short term, consider these points.

  • Amount of cover. Ensure the policy can provide the correct amount of coverage you’re seeking. Even life insurance policies for short-term durations can include minimum coverage of at least $100,000.
  • Duration of coverage. Determine how long you require coverage, whether a single year or more than five years. Then, select an insurance policy that fits the time frame.
  • Pricing. Look for the lowest-priced option that is affordable and meets your coverage needs.
  • The ability to renew. Check if the policy can be renewed and if there are any limitations on how many times it can be renewed.

Which Companies Offer Short-Term Life Insurance?

Short-term life insurance policies through these firms.

  • Progressive and Fidelity Life – RAPIDecision Life One
  • Brighthouse – One Year Term
  • Principal – One-Year Term
  • Equitable – TermOne insurance
  • Haven Life Simple 5-Year Term insurance


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