What Are the Different Terms of Term Life Insurance?

Term life insurance is an affordable way to get the required cover for the time it is needed without spending additional money. While permanent policies pay a set amount upon death, term life insurance offers a variety of options based on the applicant's unique situation and needs. Because of this, term policies are more flexible and budget-conscious.

Benefits of Term Life Insurance

Term life insurance is flexible and can be customized to meet specific situations. For example, term policies can be taken out to pay off a mortgage or maintain a certain standard of living for dependents over period of time. At the end of the term, if the policyholder is still alive a term policy loses its face value which makes this a more affordable option. People can get the cover they need without spending more than they can afford with term life insurance options.

Convertibility of Term Life Insurance

Convertibility offers the policyholder an option to convert the term life insurance to whole life term or a renewable annual policy. This gives the policyholder more options as their financial situation changes and grows. For example, older policyholders may want a renewable policy that does not require a medical examination that may impact the cost of life insurance if health conditions are discovered.

Decreasing Term Life

Term insurance may be purchased in a decreasing term where the face value gets lower each year but the premium stays the same. This policy is often used to pay off a mortgage, which is paid down over time and the life insurance decreases accordingly. If paying of a mortgage in the event of a death is the primary concern, decreased term life insurance is an ideal, affordable option.

Increasing Term Life

With an increasing term life policy, the premiums remain the same throughout the term of the policy but the amount of coverage increases. This policy is ideal to help dependents maintain their current standard of living because it takes inflation and the rising cost of living into consideration.

Renewable Term Life

Renewable term life cover allows the insurers to carry on the current policy with all benefits when it is renewed. Often the policyholder must undergo a medical examination to extend the renewal date and premiums may be changed at the time the policy is renewed. Other renewable life policies do not require a medical examination and are automatically carried over. This type of renewable life cover is ideal for people with health conditions who do not want to undergo another medical examination and risk increased life insurance premiums.

Joint Term Life

A joint policy insures two or more lives, usually a married couple. The proceeds of the policy are paid out on the first death which can leave the other party in the position of being older and uninsured.

Level Term Life

Level term life insurance provides a fixed amount of coverage with premiums that stay the same over a designated period of time. Usually level term insurance policies are fixed for increments of 10 years. However, level term life insurance policies may be purchased annually, or for increments of 5, 10, 15, 20, 25 or 30 years or until a specified age such as 65.

Group Term Life

An employer, union or organization may offer its employees or members group term life insurance. Because the policies are offered to multiple people, the rates are usually lower. However, the policyholder must remain a group member to receive the insurance benefits. Terminating the relationship with the employer or group also means termination of the group term life insurance policy.

Term Life Policy Riders

Riders to a term life insurance policy may be purchased to modify its terms and offer additional benefits such as double payout for accidental death, often referred to as double indemnity. Policyholders may also want a premium waiver rider to waive future insurance premium payments if the insured should become disabled.

With a variety of term life policies available, everyone can find the cover they need at a price they can afford. Shopping online is a simple way to discover all the available life insurance options in the least amount of time.