-
Annual
renewable Level or Declining Term
-
Level
Term to a specific age
-
Level
term for a number of chosen years
-
Mortgage
or Key Man cover
Life
insurance comes in many different designs. Yet one can
say that all life Policies include basic Term (death
benefit) protection. Policies that add more features on
top of term - death benefit - have a variety of names
such as Whole Life, Ordinary Life, Paid-up Life,
Endowment Life, Universal Life and others. However very
basic life insurance is "Term". Yet it also
comes in a few different designs as well.
What
is Term life insurance? Basically it is a policy that
pays an amount of cash to a beneficiary in event of the
insured's death occurring during a term in time stated
in the policy. Thus a 10-year Level Term policy with a
face amount coverage for $100,000 would pay the
nominated beneficiary $100,000 in event of death of the
insured. So long as the premiums are paid on time the
policy remains in force for ten years from commencement
date. Term policies do not have a savings or cash
build-up feature. It simply has a death benefit and if
death does not occur then there is no surrender or cash
value paid upon completion of the term. Purpose of term
life is to simply provide for a beneficiary's cash need
over a specified period of time in event that the
insured person meets an early death. Commonly used to
pay mortgages, children's education, scheduled business
contributions and the like.
Term
policy designs are commonly:
1.
Level term is protection from a starting age to a
specific future age usually not later than to age 65 or
70. Premium amount due remains same for each year up to
end of the term of coverage.
2.
Specific
level term policies can be for 10 year, 20 year or 30
years. These are purchased to cover cash payments
expected or committed to be made by the insured person
over the term of policy years chosen that can't be made
because of the insured person's early death.
3.
Declining
term covers a mortgage over a set period of time. The
death benefit decreases as the mortgage balance owed
decreases and totally ceases when the mortgage is paid
in full.
Annual
renewable level term is commonly the most affordable.
Starting premiums and then renewal premiums are based on
"attained age", thus increase each year.
Policyholders pay less per $1000 cover when young and
usually this is when they need protection the most.
Renewals, though rising in cost each year, can continue
up to age 65 or 70. This is very popular and effective
cover for young families and young businesspeople.
Businesses commonly use such cover for "Key
man" protection of the firm.
|
Home
