Types of Term Insurance
1. Level Term Insurance: This is the most basic type of term insurance where the death benefit remains the same throughout the term of the policy. Premiums also remain same, meaning they do not increase over time. Level term insurance provides straightforward coverage with predictable premiums, making it easy to budget for.
2. Decreasing Term Insurance: In a decreasing term policy, the death benefit decreases over time while the premiums remain level. This type of policy is often used to cover specific financial obligations that decrease over time, such as a mortgage or other loans. As the outstanding balance decreases, the amount of coverage needed also decreases, aligning with the decreasing financial obligation.
3. Increasing Term Insurance: Increasing term insurance provides coverage where the death benefit increases over time while premiums remain level. This type of policy is designed to help the insured keep up with inflation and rising financial needs. The increasing death benefit ensures that the coverage maintains its value over time, providing adequate protection against future expenses.
4. Renewable Term Insurance: Renewable term insurance allows the insured to renew the policy for an additional term without the need for a medical exam. Typically, the premiums for renewal increase with each renewal term since the insured is older and may present a higher risk to the insurance company.
5. Convertible Term Insurance: Convertible term insurance policies include an option that allows the policyholder to convert the term policy into a permanent life insurance policy without the need for a medical exam. This feature provides flexibility for individuals who may want to switch to permanent coverage in the future to enjoy features such as cash value accumulation and lifetime protection.
6. Term Riders: Some insurance companies offer term insurance riders that can be added to permanent life insurance policies to provide additional temporary coverage for specific needs, such as covering a mortgage or providing extra protection during the early years when financial obligations are higher.