Lets say you just signed a new 20 year mortgage and your wife is staying at home to raise your children.  In the event of your death you want the mortgage to be paid off.  So all you need is life insurance with a face value equal or greater than your mortgage.   The insurance company now knows your exact risk type and length of the term.   They are basically “betting” that during this term fewer people will have claims than are paying into them.

Contrast this to a universal or whole life policy.  Part of your premium is now going to an investment piece that you expect to grow.  The insurance carrier will need to make a profit off this as well so part of your premium will go to covering this side.  Also, most universal or whole life policies do not have an end date nor do they allow the insurance company to “re-rate” you and raise your rate.  So with a universal / whole life policy it will not be a question of IF you place a claim, it is a question of WHEN you die and there is a claim on your insurance.  The only way for the insurance company to remove the risk is if you cancel your policy.

Due to these factors, term insurance is much more affordable than universal or a whole life policy.

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