Types Of Term Life Insurance
Term Life Insurance is an affordable life insurance policy typically sold in large face amounts to provide funds for accumulated debt, monthly living expenses, and loss of income to the surviving loved ones. The policy name is derived from policy period or term of the policy which is typically 1, 5, 10, 20, or 30 years. There are several types of term insurance products available in order to accommodate the needs of the policyholder.
Level Term Life Insurance
Level Term is the most common of Term Insurance policies. The policy is guaranteed to have a level premium for the term of the policy which is typically sold in 10, 15, 20, and 30-year terms.
If the policyholder dies during the policy term, the death benefit will be paid to the beneficiary listed on the policy. This type of policy is typically used to insure against loss of income, loss of living expenses, and outstanding debt of the policyholder.
Decreasing Term Life Insurance
A decreasing term life insurance policy is one that provides a death benefit that will decrease at a predetermined rate over the life of the policy. Although the death benefit decreases periodically, the monthly premiums typically remain the same. This type of decreasing benefit policy is primarily used to cover loan balances, so that as the loan balance is reduced, so is the death benefit.
Increasing Term Life Insurance
This is a term life policy where the death benefit is increased each year at a predetermined rate on the anniversary of the term. As the death benefit increases, so does the premium. This product is typically sold to be used to offset the affects of inflation.
Renewable Term Life Insurance
Renewable Term is a clause contained in a term insurance contract (policy) that allows the insured to extend the coverage of the initial term for a set period of time (typically 1 to 5 years) without having to requalify for coverage. The premium is increased to reflect the new age of the insured when the policy renewal is offered and accepted, however, proof of good health is not required by the insurer.
A joint term life insurance policy is designed to allow to people, typically spouses, to share in one life insurance policy. There are two settlement options available with joint term:
- First to Die – this option allows for payment of the death benefit to the surviving spouse when the other spouse dies.
- Second to Die (survivorship) – this option allows for the payment of the death benefit to be made to the surviving beneficiaries after the death of both spouses.
Term Life insurance is a great vehicle for providing the necessary funds to surviving loved ones. Since there are multiple types of policies that have multiple benefits that can be added, Term Life Insurance has become one of the most preferred and affordable types of life insurance.
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