What Are The Common Policy Variations Of Term Life Insurance?

Term life insurance is not always the same. Each policy has a few variations that can be chosen when the policy is applied for that will have an effect on how the policy is handled in the future. Because of this, a 10-year term life policy may vary substantially in cost and behave differently when you pass away or the policy expires.

Level or Declining - Term life insurance may be level or declining, depending on your insurance company and the choices you make during the application. Level term life policies will pay out the full value of the policy throughout the duration of the policy. Declining term life insurance has a lower payout the longer the policy is in effect. Level term life policies will generally cost more, and declining policies may either cost less per premium payment or slowly decline in premium cost as the term advances.

Renewable Policies - Renewable term life insurance means that when the policy expires it can be renewed, usually at the cost of higher premiums. A non-renewable policy will expire at the end of the term. Whether or not you need a renewable policy depends on the purpose of purchasing it, but insurance experts advise that purchasing a whole life insurance policy is a more beneficial choice if you think the policy may need to be renewed later, since whole life remains effective throughout the lifetime of the policyholder and generally costs less than term insurance.

Convertible Term Life - Convertible term life insurance is a policy that can be turned into a whole life insurance policy, or some other type of life insurance that carries a cash value. Converting to whole life from a term life insurance policy may require you to get a physical examination and meet other criteria that a term life policy does not require.