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Life Insurance
Types of Term Life Insurance
When you consider taking term life insurance you need to look into the types available under this insurance from. Term life insurance is pure insurance in the sense there is no build up of cash value and it pays out in the event that the policy holder dies during the policy term. The pay out from the policy can be used for expenses such as funeral costs, mortgage payments, care for those depending on the policy holder’s livelihood, dependents’ educational expenses and so on.
One type of term life insurance policy to consider is the annual renewable term (ART). In this policy type, you pay a premium for the policy on a yearly basis, but the policy will continue to be applicable for a certain number of years. In term life insurance the minimum term period is one year and during this time if the policy holder passes away, the policy pays out, but mostly this situation is unlikely to happen. Taking an annual renewable term (ART) ensures a yearly premium payment, but the policy will stay in force for a fixed number of years.
In an ART, the policy holder pays a larger premium amount than they would if they had taken a one year term life insurance policy. The period for which the ART applies can be 10 years, 30 years or even up to the age of 95. The premiums will be paid every year and will rise up as the policy holder ages.
More popular than the ART is the Level Premium Term Life Insurance Policy type. In this form of term life insurance, premium is paid every year, but it will remain the same for a fixed number of years, which may be 10, 20 or 30 years. This premium amount is definitely going to be higher than in an ART because it will take into account the change in premium rate in the market in the years to come, plus the future value of money.
Most Level Premium Term Life Insurance policies have a renewal option, which means the policy can be renewed after the insured period expires. This clause will be revoked in case the policy holder becomes sick or see a significant deterioration of health.
Before you sign up for the term life insurance policy be sure to read up on all terms and conditions. This way you can make an informed decision and will know exactly how your policy will pay out to your beneficiaries.
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