Term life insurance is a contract that provides life insur-
ance protection for an agreed period of years.
Almost all life insurance companies offer choices of term
life policies with terms of 1, 5, 10, 15, or 20 years.
The face value of the policy is only payable if the insured's
death occurs during the term of the policy.
Term Life Insurance Provisions:
GUARANTEED RENEWABLE - This provision
usually provides that up to a certain age, such as 95,
a term life policy can never be cancelled as a result of
changes in the insured's health, occupation, etc. This
assumes that the premiums are paid in full as they
become due.
Guaranteed renewability doesn't mean the premiums will
remain level beyond the initial term specified in the con-
tract. For example, in the case of a $100K ten-year re-
newable term policy with an annual $150 premium, the
premium is guaranteed level for 10 years. However, after
the first ten year period the premium will continue to in-
crease with each renewal based upon the insured's attained
age at the time of renewal & the renewal rate then in effect
at that time.
CONVERTIBLE - This provision allows for conversion
of a term life insurance policy into a permanent (i.e., whole
life) policy. An adjustment to the premium charge is made
and no evidence of insurability is required.
ANNUAL RENEWABLE TERM INSURANCE
Policy renewal is guaranteed each year, regardless of the
insured's physical condition, until you attain a specified
age (depending upon the specific policy & state in which
the policy is issued). The cost per $1,000 of this type of
term insurance protection automatically increases each year.
LEVEL TERM INSURANCE
The amount of life insurance coverage provided by this
type of policy remains level during the policy period.
Level term insurance policies are usually issued for 5, 10,
15, or 20 year terms.
The cost per $1,000 of this type of term insurance protec-
tion usually remains level. The exceptions to this general
rule are hybrid graded premium type level term policies
(i.e., a level term policy having a 10 year guarantee period
with a 5+5 year stepped rate guarantee providing one set
of level guaranteed rates for policy years 1-5 and another
set of level rates for policy years 6-10).
DECREASING TERM INSURANCE
The amount of life insurance coverage automatically de-
creases during the term of the policy until it reaches zero.
The premium remains level as the amount of life insur-
ance protection decreases. "Mortgage insurance" (de-
creasing in conjunction with the amortization of the mort-
gage) is a familiar type of decreasing term insurance. |