Types of Life Term Insurance Policy

Life term insurance policy is a common, cheap and flexible type of life insurance policy, hence the vast number of people that prefer to apply for a Term life insurance. It is however worth mentioning the unique features of the policy for easy understanding of the different types.Term life insurance policy includes the following:

It covers a short term e.g. 5, 10 or up to 25 years
The policy owner determines the death benefit or the amount of money to be paid
It carries no cash value and there are no benefits when the term expires

The two basic types of term insurance are the level term insurance and the decreasing term insurance. The basic idea involved is the amount the insurer would pay a holder of the policy on the death of the beneficiary.

Level Term
The level term insurance policy basically pays the same amount of death benefit at any time within the insurance policy term until the death of the beneficiary. That means for example if an insured individual dies in the third year within a 5 year term insurance policy, he would be paid the same benefit amount he would have been paid if he had died during the fifth year i.eit is level all through the term. Also the premium paid by the policy holder is also constant through the term of the insurance policy. It is usually in different range of terms- it may be five years, ten, fifteen or even up to a twenty year term. Another interesting thing to note about level term is that most include an opportunity for extension of terms in the event that the policy expires which most times would be secured except if a situation arises that demands a determination of insurability by the insurer in case the policy might need to be reviewed.

Decreasing Term
This is cheaper than the term life insurance. In simple terms, the policy holder pays the same amount of money as premium for the agreed term of insurance cover but most notably, his cover benefits decreases by a set amount each year. That means for example if his lump sum insurance benefits is $50,000 this year, it would be lesser the following year say by a set amount e.g $10000 but the other good side of it is that your outstanding loans or mortgages are reduced. If you are seeking for an option that would guarantee that your outstanding debts would be paid, then decreasing life term insurance seems to be a more cost effective alternative.

Increasing term
It is not really common but there is an increase of cover benefits but with an increase in amount of premium paid after the change.

Convertible Term Life Insurance Policy
Are you looking for a flexible plan that affords you the luxury of switching to a permanent life policy? Then you might for a want of better choice go for the Convertible Term Life Insurance Policy. A lot of people go for the level term insurance policy because it is cheap and easily affordable and therefore apply for it but in the cause of it they discover they need more needs and then they want to consider going for a permanent life policy- instead of having to apply afresh for it, they can move from their current level term to a permanent policy. It affords them the luxury of having to go through physical or medical questioning because the insurance provider would assume their health status when they started with the level term policy. It comes with an increased premium on conversion to the permanent life policy.

Renewable Term life policy
This like the convertible term life insurance policy has the flexible part to it where the policy holder can renew his current level plan by say three or five years. There is no need to take medical checkup or physical questioning for determination of insurability; it is all based on the insurer’s assumption of previous health status at the start of the current term. The policy holder must have developed a good relationship with the insurer and paid his previous premiums when due. There is however a clause of renewal up to a certain age because it is a fact that one’s health declines as one increases with age.