Understanding the Types of Term Life Insurance

Term life insurance is a type of temporary life insurance policy. Unlike whole life insurance, it doesn't build cash value, however, term life rates allow you to buy the most insurance protection for the smallest dollar amount. A number of term life policy options are available, depending on your unique situation.

Term Life Insurance Basics

Term life insurance provides a death benefit during a specified time period, or term. You can generally purchase a term life insurance policy for a period of five, 10, 20 or even 30 years, as long as an insurance provider finds you insurable. If you pass away during your insurance term, your beneficiary will receive the agreed upon death benefit.

Because term life insurance doesn't build cash value, as whole life insurance does, you aren't entitled to a cash payment if you discontinue your insurance for any reason.

Once the term is over, you're no longer covered, unless you purchase additional insurance. If you decide to renew your policy, your term life rates will likely increase, as your increased age may have put you into a higher mortality risk category or your health may have changed.

Types of Term Life Insurance

If term life insurance is right for you, many term life insurance policy options are available for you to choose from:

• Convertible term: Term coverage type that gives you the right to convert your policy to a permanent one, such as whole life insurance.
• Decreasing term: Coverage amount decreases over the term, while premiums generally stay the same.
• Group term: Term coverage usually purchased by an employer or other professional association, insures members of the group. If you leave the group you usually can not take the insurance with you.
• Level term: Your coverage amount and premiums remain fixed throughout your term, usually sold in 10-year increments.
• Increasing term: Coverage amount increases over the term, however, so do premiums.
• Renewable term: This term coverage allows you to renew your policy at the end of your term without having to submit evidence of insurability.