Forms of Term Life Insurance
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Forms of Term Life Insurance
Term life insurance policies exist in two main forms: annual renewable term and level term.
Things To Know
- Annual renewable term is guaranteed to renew each year.
- Level term premium stays level for a certain number of years.
Annual renewable term
Annual renewable term covers one year, but is guaranteed to renew each year for a certain number of years. The coverage period varies from 10 to 30 years or up until a certain age, such as 95. The premiums increase each year.
Level term
Another option is level term life insurance. As the name suggests, the premium stays level for a certain number of years. After that term, the premium is likely to rise. The premiums’ cost is based on the total cost of each year’s rate, plus an inflation adjustment. Because of this, the longer the term of coverage is, the higher the premium.
Most level term policies contain a renewal option. This option, however, may not be guaranteed, and the policyholder may have to offer proof of insurability in order to get renewed. This can happen, for example, if the insured person’s health takes a turn for the worse.