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Term Life Insurance

As the name itself suggests, term life insurance is so called as it offers coverage to an individual for a specified term or period say, for instance, 1, 5, 10, 15 or 20 years. In case the individual passes away during the term, the term life insurance pays cash benefits to the beneficiary. However, after the term is over, the policy has to be renewed, else the coverage would cease. Moreover, if the individual dies after the coverage ceases, then no cash benefits would be given.

Term insurance is also referred to as pure insurance as well as temporary insurance. Since all types of term life insurance policies are meant for a specific time period, the term that is best for you would depend on the age of your children, how many years are left for your retirement and several other factors. Just have a glance through some of the widely known term policies.

Annual Renewable Term Insurance

This term insurance is renewable every year up to a particular age limit which is usually 65 and sometimes even more than that. Since the probability of dying increases with every passing year, the amount to be paid as premium also increases every year when an individual renews this term insurance. However, if you purchase this policy at a younger age when you are unlikely to die, you can get a large amount of coverage for just a small amount of premium.

Renewable Term Insurance

An insurance company allows an individual who has purchased a renewable term insurance to renew his coverage after the completion of the term of the policy which is usually 5 to 20 years even though his health has deteriorated further. The working of a renewable term insurance is similar to that of annual renewable term insurance but for a longer time period.

Level Premium Term Insurance

It ensures that an individual’s premium amount would remain the same every year during the term of the policy which is usually 5 to 20 years. The insurance premiums are kept the same by charging an average of the premiums that would be charged with an annual renewable policy. The greatest benefit of this type of insurance is that the premiums remain the same throughout the term of the policy, even as the individual gets older every year.

Decreasing Term Insurance

In this type of term insurance, an individual’s cash benefit decreases every year whereas the premiums remain level throughout the term of the policy. Decreasing term is usually used for covering those items the cost of which decreases over time.

Convertible Term Insurance

This type of term insurance allows you to convert your term insurance to other types of insurance policies that are being offered by the insurance company that has issued this convertible term insurance. However, since this type of insurance poses higher risk for the insurance company, the cost of it is usually more compared to an annual renewable term insurance.

Tags: cash, coverage, Insurance, policy, risk

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