Types of Term Life Insurance, Choose the Right One for You!
Types of Term Life Insurance, Choose the Right One for You!
Term life insurance is one of the most commonly purchased types of life insurance. It differs from whole life insurance in that the policy holder pays premiums and is only eligible for the benefits of the insurance during the relevant amount of time the insurance is in effect. For example, a fifteen year term insurance policy will only pay out the death benefit if the policy holder dies during the fifteen years after the start date of the policy. Unless the policy is renewed, they will not be able to collect on the insurance if they die even one day after the policy expires. There are a couple of different types of this insurance.
Level term life insurance describes a type of insurance where the premiums remain the same during the life of the policy. So if you were paying $100 per month at the beginning of a 20 year term policy you will be paying the same amount at the end. This is good for people who are on a fixed budget and want to have some security in their monthly payments. However, once the insurance expires, the amount can go up if you renew the policy. Additionally, you are often required to pass a medical exam in order to qualify for this type of insurance which means you can be rejected if your health declines.
A renewable policy does not have a medical requirement and allows you to renew indiscriminately. Typically, though, the premiums you must pay will be cheap when you are young but gradually become more expensive as you age. Insurance companies are basically placing a bet that you will not die during the time you are covered under the policy. The higher the risk that you may become deceased while they are covering you, the higher the premiums you will have to pay.
A convertible life insurance policy is one where you start out with a term policy but are able to switch to one that is permanent. This is a good policy to get that can help guard against the rising expense of maintaining life insurance especially as you age. This is best for people who expect a regular increase in income throughout their lifetime. While you can do the conversion at any time, it is always best to do it as early as possible to lock in the lowest rate. You should thoroughly exam your family's needs to determine the best type of insurance for you.
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