Types Of Term Life Insurance
Types of Term Policies Available
The insurance companies in the US offer different types of term life insurance. Some of the popular types of term life insurance include Annual renewable term insurance, Renewable term insurance, Level premium term insurance, Decreasing term insurance and Convertible term insurance.
Annual Renewable Term Insurance
If you get yourself an annual renewable term insurance, your policy becomes automatically renewable each year up to a specific age limit. The limit is usually set to 65 years, but sometimes more. Each year that you renew, your premiums go higher. If you buy your policy when you are young and unlikely to die, you may get substantial coverage for an inexpensive premium.
Renewable Term Insurance
With this policy your insurance company automatically allows you to renew your coverage once your present term of policy is over even if your health has deteriorated. Annual renewal also works in the same way, but for a longer period of time. Your health may undergo a lot of changes in a span of 5 to 20 years. This is why renewability is a valuable feature.
This feature poses a greater financial risk for the insurance company and hence the term coverage generally costs more than the annual renewable policies. Check the terms and conditions of renewing your policy with the company. The conditions may vary between companies.
Level Premium Term Insurance
With this policy you can rest assured that your premiums will stay the same each year for the term of your policy, generally 5 to 20 years. Your premiums remain just the same and the companies charge you an average of the premiums that they would ordinarily charge you with an annual renewable policy.
This means that you pay more premiums in the early years and less in the later years. A real advantage of this policy is that money that you pay as premiums remains fixed throughout your policy, even as you age. However, if you change your policy in the middle of your term your premiums may go higher.
Decreasing Term Insurance
With this policy you will be able to pay your mortgage in case there is a disability or even death. But the insurance premiums are high and as you pay your mortgage the value of your insurance actually goes down.
Convertible Term Insurance
If you have a convertible term insurance, you can convert your term insurance into any other type of insurance policy like whole life insurance or endowment life insurance offered by the issuing company. If your insurance needs change over time, this policy can be quite advantageous. Since this involves a greater risk for the insurance companies, the premiums are likely to be higher.