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Forms of Term Life Insurance Policy
Term life insurance is said to be the original form of life insurance. It covers a specified term only, so it can be taken as a temporary form of insurance. It is also considered to be one of the most inexpensive ways to purchase a considerable death benefit on coverage per premium per dollar basis. If the insurer dies during the specified time period, the death benefit will be paid to the beneficiary. A term life insurance policy can be of various types depending upon its term.
Annual Renewable Term is one of the simplest forms of the policy with a term period of one year. If the insured person dies during the one year term, then the insurance will pay the death benefit to the beneficiary. The term period specified is followed very strictly. If the insured person dies even a single day after the last day of the policy term, no amount is paid. Annual term policy is not considered very cost effective.
In Level Term form of term insurance policy, the premium is same for the given period of years. The premium is the calculated by taking into consideration the cost of each year's annual renewable term rates averaged over the term, with a time value of money adjustment made by the insurer. Commonest time periods chosen by consumers are 10, 15, 20, and 30 years. Here, longer the term premium is level for, higher is the premium.
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