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What are the different types of term life insurance policies?

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There are two types of term insurance: level term and decreasing term. Almost everyone nowadays purchases level term insurance. The phrases “level” and “decreasing” relate to the amount of the death benefit during the policy’s duration. If death happens at any time throughout the term, a level term policy pays the same benefit amount.

Level terms that are commonly used

  • Renewable on a yearly (or annual) basis
  • Term of 5 years renewable
  • 10-year,15-year,and 20-year terms are available.
  • Term of 25 years
  • Term of 30 years
  • Term that lasts till a certain age is reached (usually 65)
Renewable term policies
The once-popular yearly renewable term is no longer a hot seller. The most frequent term length is presently 20 years. Most businesses will not offer term insurance to an applicant for a period that expires when he or she reaches the age of 80. If a policy is “renewable,” it means that it can be extended for another term or terms, up to a certain age, even if the insured’s health (or other factors) would cause him or her to be turned down for a new life insurance policy.
In most cases, the policy’s premium is determined by the insured person’s age and health at the time the policy is issued, and the premium remains constant (level) throughout the term. Premiums for a 5-year renewable term can be set at a fixed rate for the first five years, then adjusted to reflect the insured’s new age, and so on every five years. Some longer-term plans promise that the premium will not rise throughout the policy’s term; others do not, allowing the insurance company to raise the rate at any time during the policy’s term. Convertible term policies are available. This implies that the policyholder has the option to convert the policy to permanent life insurance without providing extra proof of insurability.

“Return of premium”
When it comes to most forms of term insurance, such as homes and car insurance, if you haven’t made a claim by the time the policy ends, you won’t get a refund of your payment. Your premium bought protection that you already had but didn’t need, and you got a good deal. Because some term life insurance customers were dissatisfied with the results, several insurers produced term life with a cash value.

The “return of premium” function is a feature that allows you to get your money back. Premiums for insurance with this feature are frequently substantially more than for plans without it, and you must normally keep the policy in force for the whole duration of the policy or forfeit the return of premium benefit. For the return benefit, some insurance will refund the base premium but not the excess premium, while others will return both.

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