Term Life Insurance Policy
The Difference between Level Term and Annual Renewable Term Life Insurance
When purchasing a term life insurance policy, there are two main types of policies you should consider. These are the 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. The choice between Annual Renewable Term Insurance and Level Term Insurance is a personal one and should be made with much thought and consideration after speaking with a knowledgeable 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. These policies may be excellent stop gap measures for people in need of a short term solution to their insurance needs, but they are wrought with difficulties as well. The issue of renewing is the one that faces policy holders. The situation is that if you discover you are at risk eg through a rare illness, but do not die, then the insurer is unlikely to renew the policy. 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. On the upside, these policies are often a perfect fit for young, healthy, financially struggling families because the premiums for healthy young adults are relatively low and the chances of being diagnosed with a terminal illness over the course of the year are low as well.
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.The terms of the policy can vary from 10 to 30 years, sometimes a bit more, and the premium levels are consistent throughout the policy term. This is typically more expensive than a renewable option. This is because the premium is based on your risks of death for the entire term of the policy.Premiums will rise at the later end of this policy because there is a higher risk in later years than in earlier years. A Level Term Life Insurance Policy averages the premiums for each year of the policy and determines your premium amount based on this average. Your premium will never go up, but you are likely to pay a higher premium on average. As an added benefit, most Level Term Life Insurance Policies include an option to renew the policy.At the end of the term it’s therefore possible to renew your policy. In some cases, not all options to renew can be guaranteed. Some, but not all, insurers ask for a medical examination.
Whole Life Vs Term Life Insurance Policy
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