Short-Term Life Insurance Options

In this article...
  • Find out what short-term life insurance options are available to give you coverage for a limited time period. Get the facts about costs, features and benefits.

Life insurance is primarily a way to ensure that your loved ones are protected from financial hardship in the future, so many people look for long-term solutions when shopping for a policy. However, not everyone wants or needs life insurance that lasts for years to come. Insurance companies do offer short-term life insurance products to meet their needs. Understanding the features and benefits of these types of life insurance can help you select the option that is the right fit for you.

Types of Short-Term Life Insurance

Life insurance companies offer two main types of short term life insurance: annual renewable and temporary.

Annual Renewable Life Insurance

An annual renewable life insurance policy lasts for one year. Unlike other types of term life, the product doesn't just expire at the end of the term. Instead, the policy renews for another year. Most annual renewable products initially cost less than longer term options. Each time the policy renews, the premium normally goes up. As a result, you eventually pay more per month than you would for a long-term life insurance policy.

Temporary Life Insurance

After you complete a life insurance application, the insurance company's underwriting team begins reviewing information. At the end of the review, the underwriters either deny the application or approve it with an established premium rate.

The average insurance application takes 5 to 6 weeks to process. If you delay getting a medical exam or the underwriters need additional information, the process or waiting period could take even longer. During the waiting period, you're not covered by the life insurance policy. Temporary life insurance helps bridge the coverage gap during the underwriting waiting period. It takes effect from the moment you establish the policy and lasts until one of the following occurs.

  • The life insurance application receives approval and your policy goes into effect.
  • The temporary life insurance expires.
  • You cancel your application.
  • The underwriters decline your application.

Temporary life insurance isn't a standalone product. You can only obtain it from an insurer when you apply for a permanent or term life insurance policy.

What Is the Shortest Term Life Insurance Policy?

For standalone term life insurance, the shortest term available is usually one year. Temporary life sold with other life insurance policies typically has a maximum term of 60 to 90 days. If your application is still in process when the temporary life insurance expires, you're no longer covered.

Cost of Short-Term Life Insurance

For annual renewable term life insurance, the monthly premiums depend on the amount of insurance that you're purchasing and risk. Underwriters determine how likely you are to die in the year following your application. The higher the risk, the larger the premium. Some factors used to determine risk include:

  • Age
  • Health
  • Family medical history
  • Occupation
  • Lifestyle choices like smoking and drinking alcohol
  • Recreational activities

Insurance companies tie temporary insurance premiums to the quoted price for the policy you apply for. Generally, more expensive life insurance policies lead to costlier temporary insurance premiums.

Who Can Benefit From Short-Term Life Insurance?

You may want to consider annual renewable life insurance if you are:

  • Currently losing weight to improve your health
  • Preparing to undergo a medical procedure to improve your health
  • Trying to quit smoking
  • In the middle of a probationary period following a felony conviction
  • Pregnant, particularly if you're in your third trimester
  • A new mom who recently gave birth
  • Traveling soon
  • Anticipating a new short-term financial obligation — for example, if someone else's child is going to be living with you for a year or you took out a short-term personal loan that lasts for only a couple of years, you may want insurance
  • In need of extra coverage on top of other life insurance for a short time
  • Concerned about a pandemic and want coverage only until it ends
  • Unable to afford a long term policy right now

Temporary life insurance is beneficial if:

  • You urgently need protection
  • You are applying for a large policy that will likely take time to process
  • You may need to delay a medical exam for any reason

Can You Cash Out Short-Term Life Insurance?

Term life insurance doesn't have any cash value. While you can cancel a policy, you won't get any money back unless you do so during the free look period. Laws require insurance companies to give you a minimum number of days to review the details of your life insurance policy. If you terminate the insurance before the free look period ends, the insurer must refund any premiums you already paid.

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