A more thorough explanation:

Term life insurance is a type of life insurance that provides coverage for a specific period of time. It is a basic policy that only pays out a death benefit if the policyholder dies during the term of the policy. The policyholder pays a monthly or yearly premium, which increases as they age. When the term ends, the policyholder can choose to extend the policy or convert it into a different type of insurance.

Unlike whole life insurance, term life insurance does not have an investment component that generates a cash value. This means that the policy cannot be traded in for its value before the end of the term.

Term life insurance policies can be customized in many ways. For example, the premiums can increase every year, every five years, or at any other interval agreed upon by the parties to the contract.

John purchases a 20-year term life insurance policy with a death benefit of $500,000. He pays a monthly premium of $50, which increases slightly each year. If John dies during the 20-year term, his beneficiaries will receive the $500,000 death benefit. If John outlives the term, he can choose to extend the policy or convert it into a different type of insurance.

This example illustrates how term life insurance works. John is covered for a specific period of time and pays a premium for that coverage. If he dies during the term, his beneficiaries receive a payout. If he outlives the term, he has options for continuing the coverage.