|
Types of Life Insurance...
|
|
|
|
Reasons for Life Insurance...
|
|
|
|
Term Life Insurance
Level Term
With a level term life insurance policy the insured's
death benefit (face amount) remains the same for the length
of the term period, which may be as long as 10, 20, or 30 years.
The premiums can be guaranteed for the entire term or a portion of the term.
If the policy is guaranteed renewable, you can extend coverage for an additional
term without having to qualify again, though the annual premium will increase
as you age.
Although the cost of insurance in the first few years will probably be higher for a
level term, than the other types of term described below, the lifetime cost of a level
term with the same benefit is usually less. As with all term policies, you don't build
up a cash reserve and your coverage ends at the end of the term or at any time you stop
making payments. The exception to this is a rider that can be added to some policies
that builds up cash value equivalent to the premiums you have paid.
This rider is called return-of-premium (ROP).
Level term coverage is the most preferred and beneficial method for obtaining coverage
of this type.
Decreasing Term
This is a form of life insurance where your death benefit decreases each year
while your premiums remain level. This type of coverage is not suitable for most insureds.
Annual Renewable Term
The simplest form of term life insurance is for a term of one year. The premium
is paid based on the expected probability of the insured dying within the year the
premium is paid.
The coverage is called annual renewable term because each year a new premium is paid
renewing the policy for one more year based on the increasing probability that the
insured will die. Because the probability of dying increases with age so does the
premium. This type of coverage is very inexpensive when the insured is young but
exponentially increases as the insured gets older. It is not uncommon for the
insured to be "priced out" of their coverage prior to death.
|
|