The Different Types of Term Life Insurance: Which One is Right for You?

Shawn Plummer

CEO, The Annuity Expert

Many types of term life insurance policies are available on the market today. So, which one is right for you? That can be difficult to answer without knowing more about your specific needs and goals. This guide will discuss the eight most common types of term life insurance policies. We will also help you decide which type of policy is best for you.

Renewable Term Life Insurance

Renewable term insurance is a policy that provides for a set period of time or “term” and may be renewed at the end of that period without proof of insurability. Renewable term policies might restrict the number of renewals or an age beyond which renewals are not permitted. The renewal premium will be calculated based on the insured’s current age.

Annual renewable term (ART) insurance is a popular, less expensive form of renewable term coverage.

Who has the Option To Renew A Renewable Term Policy?

Nonrenewable Term Life Insurance

A nonrenewable term policy is issued for a specified term and may not be renewed at the end of the term.

However, an insured may always apply for a new policy at the end of the term, but there are no guarantees, and the risk is based on current underwriting standards.

Convertible Term Life Insurance

A convertible term policy enables a policy owner to exchange or convert temporary coverage for permanent insurance without producing proof of insurability.

The policy must be converted before the expiration of the term. The premium is determined by attained age when a policy is converted.

Reentry Term Life Insurance

A reentry term insurance policy allows the insured to offer evidence of insurability after the term and apply for reduced premium rates lower than the guaranteed rate available for a renewable term policy.

Level Term Life Insurance

A level-term policy is a life insurance policy where the face amount (the amount of money paid out to your beneficiaries if you die while the policy is in effect) stays the same for the entire term of coverage. The premiums (the amount you pay each month to keep the policy in effect) may increase yearly, or they may be level for the entire term.

Decreasing Term Life Insurance

A decreasing term policy is a type of life insurance that starts with a high face amount (the amount of money the policy will pay out if the person dies while it is in effect) and then declines each year. This type of policy is suitable for many needs that go down over time, such as protecting the unpaid balance on a mortgage.

Increasing Term Life Insurance

Increasing term insurance starts with a low amount of protection. Then, the face amount gets bigger over time. Increasing term insurance can sometimes be sold as a rider to another policy. This will give you an extra death benefit equal to your total premiums.

Interim Term Life Insurance

When a person wants immediate protection and is thinking of starting a permanent insurance policy soon, an interim term policy may cover the period before permanent protection begins.

The interim term is a type of protection that converts automatically after a specific time. This time is usually around 11 months, but it can vary depending on the company.

The price of temporary coverage is based on how old you are when you get it. The price of permanent coverage is also based on how old you will be when it starts.

Return of Premium Term Life Insurance

Return of premium term life insurance returns all premiums paid in a lump sum if you outlive the term. If you cancel your policy early, you could get back a partial amount of the premiums paid.

Mortgage Redemption Insurance

The mortgage redemption policy is insurance that will help you pay off your mortgage if you die before the loan is paid off. The amount of insurance will be enough to cover the unpaid mortgage.

Deposit Term Insurance

Deposit term insurance is a level term insurance policy with a much higher premium for the first year then reduced in subsequent years. 

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Frequently Asked Questions

Which component increases in the increasing term insurance?

The death benefit is the main component of increasing term life insurance policy. As you age, the death benefit will increase, providing your loved ones with more financial protection in the event of your passing.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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