This type of life insurance provides protection for a specified period of time, typically from one to 30 years. It pays a death benefit only if you die during this term. A few of these policies can be renewed automatically at the end of the coverage period, and some can be converted to permanent insurance without the need for a medical exam.
There are many different types of term life insurance available. We have list of some to help you better understand your options.
Renewable Term Insurance
This policy allows you to renew coverage at the end of the term without having a medical exam. The company has to renew your policy even if your medical condition has deteriorated. However, the premium rate will rise greatly with each renewal.
Convertible Term Insurance
This policy allow you to convert your term coverage into a permanent policy without having a medical exam. This policy usually has a higher premium and is usually higher than non-convertible policy premiums.
Level Term Insurance
This policy provides a fixed premium for a specified number of years– usually 10 or 20 years. The death benefit remains unchanged. Beneficially, you lock in a certain premium rate for the period of the policy.
Decreasing Term Insurance
The death benefit in this policy decreases over its term. For example, you might start with $50,000 in coverage and the amount of coverage may decrease by $5,000 each year for 20 years. This type of insurance allows you to pay the same premium for less insurance over time, rather than have your premium increase for the same amount of insurance.
Increasing Term Insurance
This policy starts at one level of death benefit which gradually increases over the life of the policy. You may start with a $50,000 policy and increase the death benefit $5,000 each year for 20 years. The premium will increase each year. This kind of policy may be appropriate if you see your insurance needs growing in coming years because you are buying a house or having more children.