A term life policy insures a person’s life for a fixed term of years. These policies have the lowest premiums and tend to be popular among younger people. In reality, they are a form of bet. If the insured dies within the term, the insurer pays out. But if the insured lives on, the insurer has no liability after the term expires – it keeps all the premiums. Term Insurance Is Usually Renewable. To ensure the best value, use the search engine on this site to shop around and find the most affordable policy with the most comprehensive coverage. When searching, ask for quotes on the two main types of policy :
A level term life insurance policy
This policy fixes the amount of money payable on death so that sum is paid out no matter when death occurs, i.e. in the week after the policy is issued or on the last day of the term. There is a further option. The premium can also be fixed throughout the term or the policy is renewed each year and the premium adjusted. Fixed death benefits and premiums give both parties certainty. But if the insured has low pay when the policy is first taken out, the premium may be set to rise each year as pay improves. This option may appeal to those who are certain their pay will rise. If consistent pay rises are not certain, fixed premiums may be safer.
A decreasing term life insurance policy
This policy fixes the premium payable during the term of years, but reduces the amount payable on death. This type of policy provides protection to dependents who may be left to pay off outstanding debts like a mortgage. If that debt is also being paid off in instalments, the death benefit required will also reduce as time passes. Because the amount payable on death falls throughout the term, the premiums are lower than for level term policies.
Term life insurance policies come in several other varieties, designed to fit the varying needs of a large populace.
Straight term insurance covers the beneficiaries for the time provided in the policy. Straight term is not renewable, which means that once the term has expired, you have no right to have the insurance continue in effect.
Yearly Renewable Term
As the name implies, yearly renewable term is taken out for one year at a time. As you would guess, the price of the policy rises every year you renew it. The life insurance company must keep the policy in effect regardless of your health status, as long as your premiums are paid.
Multiyear Renewable Term
Many companies offer terms that range from 5 years up to 25 years. During the term, the yearly premium will remain unchanged. At the end of the term, assuming you can renew, the price will be hiked considerably.
Term to a Specific Age
Some policies are sold to last until a specific age has been attained, typically 65 or 70. The premium will remain level during the term but will be priced so that the company receives a profitable return. Policies such as this are not generally renewable but are usually convertible.
As a Job Benefit
Many employers and unions offer term life insurance as a benefit of employment. This is usually a group policy and protects the insured for a specific amount or for a multiple of the employee’s annual salary.