Affordable Life Insurance Articles

The different types of life insurance

When purchasing a term life insurance policy, there are two main types of policies you should consider. The two types are Annual Renewable Term Insurance Policy and the Level Term Life Insurance Policy. Having a clear idea of the two main policy terms will enable you to understand the best policy which should be considered for you and your family. Proper protection for the event of death is made possible with term life insurance. You need to consider carefully the difference between annual renewable term life insurance and level term insurance - so do speak to an insurance broker.

Annual Renewable Term Life Insurance is the simplest form of life insurance available. With a term of one year, this policy will pay out a death benefit to your beneficiaries if you die within the term, one year, of the policy. The level of premium will be determined on the possibility of death during the policy term. There may be occasions that these policies are useful in the short term, but there are difficulties too. The issue of renewing is the one that faces policy holders. Simply put, if you hold an Annual Renewable Term Life Insurance Policy and, during the term, discover you have a rare terminal illness, but do not die from that illness during the term of your insurance it is highly unlikely that your insurer will renew your policy based on your medical condition. To make matters worse, you may not be eligible for any insurance because of your new condition. This is the risk you take when you purchase an Annual Renewable Term Life Insurance Policy. The policies are a good idea for families with low risk and low cash freedom because the chances of having to call on the policy are minimal.

A much more common form of term life insurance is the Level Term Life Insurance Policy. These policies guarantee a level premium for the entire term of the policy. Common policy terms of 10 ? 30 years are available and the premium on the policy will never change. This option is slightly more expensive than the Annual Renewable Term Insurance option. This is because the premium is based on your risks of death for the entire term of the policy. Simply put, while premiums in the first fives years of a 30 year policy may be relatively low because of a low risk of death, premiums for the final five years of the policy will be relatively high because of the higher risk. The level term policy will average out - and make equal - the premiums payable through the life of the policy.You may pay a higher premium, but it should never go up. Most Term Life Insurance policies will include as an added plus point the option to renew. This means that at the end of the term you can re-up your policy. It is important to note that not all options to renew are guaranteed. You may be required to show proof of insurability in the form of an additional medical examination in order to qualify.


Prev | Next

Home Page