A term life insurance is defined as a policy where the benefits can be availed only during the term period stipulated in the policy. In other words, the death coverage is awarded to the dependents only in case of the death of the policy holder during the term period of the insurance policy. One can draw a term life insurance for many different purposes. For example, if you have a mortgage to repay and you are worried what would happen to it in case of your accidental death before repayment, you can take the term life insurance during the mortgage time period. The death benefits will automatically take care of a big chunk or the entire mortgage. This is ideal when you are sure you can take care of the repayment as long as you are well. Similarly, people who are worried about their children’s education or about the expenses in case they are afflicted with a disability that stops their earnings can go for term life insurance.
Level term life insurance is a type of term life insurance where the death benefit remains constant throughout the period of the life insurance policy. However, there is no cash value handed over to the policy holder once the term ends. One of the types of level term policies is annual renewable term life insurance policy which is quite popular because it can be extended without the need for another qualification. There is usually a limit to the number of times you can renew your policy. It is ideal for scenarios where you have a big loan or liability but are not sure about the time frame before which you can get rid of it. One must note that although the death benefit remains same even after renewing the policy the premium goes up increasing the cost of the insurance policy. Apart from the annual renewable term life, there are other options like the 5 year renewable policy, where you have the choice of renewing the policy at the end of 5 years.
An interesting variation of a term life insurance is the decreasing term life insurance. This is in a way quite the opposite of level term life insurance. This is because the death benefit decreases with time while the premium that has to be paid stays constant. If the term period is 20 years, the death benefit could reach zero by the end of the term. This type of life insurance can also be purchased with no fixed term but for the policy holder to reach a specific age.
There is convertible term life insurance and increasing term life insurance, two other types of term life policies. In convertible polices, you can convert the policy to another variety offered by the insurance provider. These are more expensive owing to the potential risk involved for the insurance companies. In the end you have to assess your needs and take a policy that lowers the risk of unforeseen events to the greatest extent.
