Term Life
Term life insurance is a type of policy that provide coverage specific length of time or term. The terms usually range between 5 years to 30 years. Term is known as pure life insurance because it has no cash value. Term policies are designed to totally benefit the beneficiary.
Term insurance is the least expensive type of life insurance. At the end of the term the policy expires. There are different types of term life insurance policies. Level, annual renewal, increasing and decreasing. Another characteristic of term insurance is except for level term, the price may fluctuate with term polices.
There are three types of term insurance:
- Level Term
- Annual Renewal Term
- Decreasing Term
Level term life insurance provide coverage for a specified period ranging from 10 to 30 years. Both the death benefit and premium are fixed. The premiums are comparatively higher than yearly renewable term life insurance. You will actually overpay the premiums in the early years so that they do not increase in the later years of the policy.
Annual renewable term policies have yearly term yearly terms, that can be renewed each year without providing evidence of insurability. The premiums change from year to year; as the insured person ages, the premiums increase. Premiums can become prohibitively expensive as individuals age, making the policy an unattractive choice for many, because as you older your life expectancy decreases.
Decreasing term policies have a death benefit that declines or decreases each year due to a predetermined schedule. The premium is fixed but the death benefit decreases. Decreasing term policies are often used in concert with a mortgage to match the coverage with the declining principal of the home loan.
