Term Life Insurance

There are five main types of Term Life Insurance for which you can receive a life insurance quote:

  • Renewable
  • Level
  • Decreasing
  • Convertible
  • Return of Premium

Renewable Term. A Renewable Term policy continues in force for a specified term or terms - usually one- or five-year increments - and can be renewed without the insured having to provide evidence of good health each year.

Level Term. Level Term policies provide a fixed amount of coverage with premiums that remain stable over a certain period of time, usually in five- to 10-year increments. Common durations for level term insurance include:

  • 10-year term
  • 15-year term
  • 20-year term
  • 25-year term
  • 30-year term

There are also policies that set the term to a specified age (usually 65).

Decreasing Term. This means the premiums remain level, but the amount of coverage decreases throughout the term.

Convertible Term. This means that you have the right to change to a permanent type of life insurance without a medical exam, although this will probably result in a higher rate.

Return of Premium (ROP). In most types of term insurance, including homeowners and auto insurance, if you have not filed a claim by the time your policy expires, you will not receive a premium refund. This is because your premium purchased protection even though you did not need it, and you have received fair value. Some term life insurance customers have been unhappy at this outcome, so some insurers have created term life with a "return of premium" feature.

The premiums for insurance with this feature are often significantly higher than for policies without it and generally require that you keep the policy in force to its term or forfeit the return of premium benefit. Some policies will return the base premium but not the extra premium (for the return benefit); others will return both.

This article is adapted from information provided by the Insurance Information Institute

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