Are you aware of the different types of term life insurance?
Before we move on to the types of term life insurance, let’s talk about what term life insurance is. Unlike whole life insurance that covers you for your entire life, term life insurance covers one for a certain number of years, say 10, 20, or 30 years. A majority of people go for term life insurance because they can use it whenever the need arises. Term life insurance fulfills your short term needs and can help you for a number of purposes, say paying for a 10-year mortgage.
To qualify for a term policy, you need to be of a certain age and you’ll have to take a health exam. If you pay your premiums on time and you die within the ”term”, your family members will benefit. However, if you die after the expiry of the period, there will be no death benefit.
Let’s take a look at some of the most common types of term life insurance policies.
- Level Term Life Insurance
Some term life policies have an annual renewal, after which the premiums rise. However, there is a type of term life insurance known as the level term insurance. It means that the premium will remain the same, throughout the policy, regardless of what the terms are. The longer the term, the higher the premium will get. Luckily, in most term policies, there is an option of renewal. However, you’ll have to take the health exam again before you get renewal. Furthermore, you have the option to convert such a policy into a permanent one.
- Increasing Term Life Insurance
Most policies offer a death benefit regardless of when the person dies. An increase in the term policy will increase the amount of money your family members will get if you pass away. That said, an increase in the death benefit will also make your premiums go up.
- Decreasing Term Life Insurance
Decreasing term life insurance is the name given to the types of policies in which the coverage decreases over the specified term. If you die while your policy is effective, your loved ones will only get what is left. Unlike the premiums on increasing term insurance, the ones on the decreasing term remain unchanged. Furthermore, with a decreasing term life insurance policy, you only get a fairly low premium, right from the start. However, the death benefit will continue to drop. If you are worried about your loved ones handling expenses, a decreasing term life insurance policy is the right fit for you.
- Renewable Term Life Insurance Policy
A renewable term life insurance policy is one that can be renewed or extended, without you having to go through a medical exam. On the flipside, a conventional standard policy asks for you to go through a medical exam. This policy has you covered, even if you are in your worse health.
- Convertible Term Life Insurance Policy
A convertible policy allows you to convert a term policy into a permanent one, with the same value. Just like the renewable term policy, this policy also doesn’t require you to pass a written or medical examination. For example, a convertible policy allows you to convert a $50,000 term policy into a permanent policy of the same value.
These were 5 of the most common types of term life insurance policies. If you are out in the market for a term life insurance plan, evaluate the aforementioned options by weighing your financial condition as well as the number of people you’ll leave behind after your death.
