When purchasing a term life insurance policy, there are two main types of policies you should consider. The two types are Annual Renewable Term Insurance Policy and the Level Term Life Insurance Policy. Understanding the key terms of these policies as well as their benefits is crucial when determining which policy will work best for you and your family. Proper protection for the event of death is made possible with term life insurance. The choice between Annual Renewable Term Insurance and Level Term Insurance is a personal one and should be made with much thought and consideration after speaking with a knowledgeable insurance broker.
Annual Renewable Term Life Insurance is the simplest form of life insurance available. With a term of one year, this policy will pay out a death benefit to your beneficiaries if you die within the term, one year, of the policy. The insurance company will base your premium on the likelihood of your death during the term of the insurance. These policies may be brilliant stop gap measures for people in need of a small term solution to their insurance needs, but they are wrought with difficulties as well. The issue of renewing is the one that faces policy holders. Simply place, if you hold an Annual Renewable Term Life Insurance Policy and, during the term, learn you have a rare terminal illness, but do not die from that illness during the term of your insurance it is highly unlikely that your insurer will renew your policy based on your medical condition. To make matters worse, you may not be eligible for any insurance because of your new condition. This is the risk you take when you buy an Annual Renewable Term Life Insurance Policy. The policies are a excellent thought for families with low risk and low cash freedom because the chances of having to call on the policy are minimal.
A much more common form of term life insurance is the Level Term Life Insurance Policy. The entire term will be achieved for a level premium throughout. Common policy terms of 10 – 30 years are available and the premium on the policy will never change. This is typically more expensive than a renewable option.The policy is based on the risks of death for the entire policy term. Simply place, while premiums in the first fives years of a 30 year policy may be relatively low because of a low risk of death, premiums for the final five years of the policy will be relatively high because of the higher risk. The level term policy will average out – and make equal – the premiums payable through the life of the policy.You may pay a higher premium, but it should never go up. As an added benefit, most Level Term Life Insurance Policies include an option to renew the policy. This means that at the end of the term you can re-up your policy. In some cases, not all options to renew can be guaranteed. You may be required to show proof of insurability in the form of an additional medical examination in order to qualify.
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