Features of Term Life Insurance

The important characteristics of Term Life Insurance are captured below:

Provides coverage for a specified period of time, called policy term
The policy benefit is payable only if the insured dies during the specified term and the policy is in force when the insured dies
If the insured lives until the end of the policy term, the insured may be given the option to continue the coverage. If the insured does not wish to continue the coverage, then the policy expires and the insurer has no further liability under the policy.
Length of the policy term varies from as short the time required to complete an airplane trip, or as long as 40 years plus. Generally, the insurers do not sell term life insurance to cover periods of less than 1 year
Term may be described as the specified number of years, or may be defined by specifying the age of the insured at the end of the term.
eg: term to age 65
Policy anniversary is the anniversary of the date on which coverage under the policy becomes effective
A policy rider or endorsement is an amendment to an insurance policy that becomes a part of the insurance contract and that either expands or limits the benefits payable under the contract. Term life insurance can also be provided through a rider attached to a policy.

Different Types of Term Life Insurance

Level Term Life Insurance

This is the most common plan of term insurance, which provides a death benefit that remains at the same level over the term of the policy. eg: under a 5-yr level term policy that provides $100,000 of coverage, the insurer agrees to pay $100,000 if the insured dies at any time during the 5-yr period that the policy is in force. The amount of each renewal premium payable for a level term life insurance policy usually remains the same throughout the policy term.

Decreasing Term Life Insurance

This type of policy provides a death benefit that decreases in amount over the term of the coverage. The policy’s death benefit begins as a set face amount and then decreases over the term of the coverage according to some stated method that is described in the policy. The amount of each renewal premium payable, for a decreasing term insurance policy usually remains the same throughout the term of coverage. Some of the decreasing term life insurance offered by insurance companies are:

1. Mortgage Redemption Insurance
2. Credit Life Insurance
3. Family Income Insurance

Mortgage Redemption Insurance
It is a plan designed to provide a death benefit that corresponds to the decreasing amount owed on a mortgage loan.

Credit Life Insurance
A type of term life insurance designed to pay the balance due on a loan if the borrower dies before the loan is repaid. Generally, the loan must be of a type that can be repaid in 10 years or less.