A Perfect Guide To Term Life Insurance
Under term life insurance, a person gets life insurance coverage for a fixed term. This can be a year or run into a couple of years according to the selected plan. In return for the term life insurance, the insurer pays the insurance company a premium. Since this kind of insurance policy does not return the total premium amount to the insurer, it is different from normal life insurance. However, in case the insurer dies within the term period, the specified beneficiary gets the entitled amount.
The nature of a term life insurance policy depends on the face amount that is kept as protection of the insurer, the premium amount to be paid to the company and the duration of the term. Term life insurance companies offer a number of different permutations and combinations involving these three factors when presenting an insurance plan. This means that companies offer term life insurance with different durations, premium amounts and face amounts.
The three common types of term life insurance policies are level term life insurance, annual renewable policies and mortgage insurance.
Level term life insurance
In level term life insurance, the premium amount is kept fixed for periods longer than a year. This could be anything from a five-year plan to a twenty-year plan. Since the premium amount involved in these policies remains constant, it is really helpful when it comes to long term planning. It comes as no surprise that a lot of people who are planning long term or are into asset management find level term life insurance policies to be beneficial. While some companies offer guaranteed renewal after the term ends, others prefer not to. When selecting this kind of an insurance policy, the companies approach towards conversion and renewal becomes very important.
Annual renewable policies
When an individual selects an annual renewable policy, the insurance company guarantees that it will return an equal or lesser amount in the case of the insurers death. Since this policy is an annual one, it has to be renewed each year. Under this scheme, the insurability of the individual is not taken into regard.
Mortgage insurance is very similar to level term life insurance policies. One of the major differences between mortgage insurance and level term life insurance is that the face value decreases periodically. This face amount is meant to equal in insurers mortgage amount on the owned residence. If the insurer happens to pass away, the insurance company has to pay the mortgage on that house.