There are two main types of life insurance products: Permanent, most frequently referred to as Whole life and Term Life Insurance. Many people opt for Term Life Insurance over a duration of five to 30 years. This option provides full death benefits for the family for the lowest monthly premium — typically while the policyholder pays down the mortgage or other financial obligations common to mid-life. While one of the great advantages of a term life policy is that it is simple and straightforward, there are many types of life insurance and term policies to choose from. See the information below to see which policies will give you the right amount of flexibility and coverage.
Guaranteed Level Term Life Insurance
The most common type of Term Life Insurance features:
- Defined annual premiums that never increase over the life of the term.
- Lowest cost for the greatest death benefit available.
- The death benefit is guaranteed for the life of the term if premiums are paid.
- There is no guaranteed renewal following the expiration of the policy.
Annual Renewable Term Life Insurance
This type of insurance is cost effective in the early years of life, however, as you age can become cost prohibitive.
- Annual premiums increase at renewal time every year, based on one’s age.
- The full amount of death benefit is available to the family as long as monthly premiums are paid.
- The ability to renew coverage is guaranteed without needing to requalify or reapply at the end of a term.
Decreasing Term Life Insurance
Families with great financial responsibilities, like mortgages or debts, expected to decrease over time can get a policy where:
- Lower monthly premiums that stay the same over the length of the policy.
- Death benefits steadily decrease over time usually monthly or annually.
- Decreasing term is usually designed to mimic the mortgage schedule.
- Underwriting is necessary to secure the most competitive rate.
Return of Premium Term Life Insurance
Most Term Life Insurance policies offer zero payout once a policy expires, with the exception of this one, with:
- Monthly premiums are pricier, but still typically cheaper than Whole Life Insurance policies.
- The full amount of death benefit is available to the family if a person dies during the term.
- Some or all life insurance premiums refunded when the term ends if a person outlives the policy.
Convertible Term Life Insurance
Many insurance policies offer this standard feature making it possible for:
- Expiring Term Life Insurance to be converted into permanent coverage without a health exam.
- Affordable, full death benefit coverage, while waiting to have enough money for a costlier policy.
- Conversions to be restricted to a set time period, such as the first 10 years, and may cost much more.
Credit Term Life Insurance
A specific debt can be repaid if the lender dies before repayment, thanks to this type of policy where:
- A credit lender is the beneficiary of the death benefit, rather than a family member.
- The death benefit reduces over time, at regular intervals.
- Underwriting, with health exams or medical questionnaires, is not required to qualify.
Adjustable Premium Term Life Insurance
Most policies stay consistent throughout the term with the exception of this policy, which:
- Begins with a lower monthly premium, but retains the right to increase it later.
- Death benefits remain consistent over the lifespan of the term.
- Holds insurers accountable to keep rates reasonable and below a maximum limit stated in the policy.
Child Term Rider Life Insurance
Most policies pay death benefits to a spouse or dependent, but this type of rider allows:
- Parents to collect a certain sum upon the death of a child.
- Cheaper insurance coverage as opposed to buying separate policies for each child.
- The option to convert to a permanent policy once the child reaches a certain age.
Accelerated Death Benefits Rider Term Life Insurance
In this unique type of rider, a Term Life Insurance policy holder can:
- Collect his or her own death benefit prior to death if diagnosed with a severe or terminal medical issue.
- Receive a lump sum to seek treatment, with the reduced remainder going to beneficiaries.
- Some life insurance companies offer this as a standard feature, without having to pay more per month to get it.
Group Term Life Insurance
Employers typically offer the cheapest form of Term Life Insurance, where:
- An employer, union, or fraternal organization covers some or all of the life insurance premium.
- No eligibility requirements are necessary to gain coverage.
- The first $50,000 of group coverage is tax-deductible.
The one drawback to Group Term Life Insurance is that it may not provide enough coverage, so individuals may also require supplemental insurance coverage.
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