Differences In Term Life Insurance

Written by Stephanie Dula
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Term life insurance policies differ in a few key ways. Since affordability is typically the most desirable aspect of this type of insurance, different companies should be compared for the best rates. Each company may offer slightly different packages with varying coverage amounts and term lengths.

Since there are fewer complexities involved with term insurance, it pays to shop around for the maximum coverage and lowest premiums. Term insurance does not build up savings reserves and is purely a death benefit guarantee for the predetermined amount of time. Term policies can vary widely in term length and the extent of increase in premiums if the policy is renewed.

Types of Term Life Insurance Policies

For example, an annual renewable term (ART) policy is for a one-year term of coverage, with an increase if another term policy is purchased. The amount of increase may be based on age or current health, depending on the company. These policies are the most affordable life insurance policies out there, being that they only pay beneficiaries if a policyholder dies within the one-year period. People often take out these policies if they need very low premiums and immediate coverage, or are required by a loan agreement to carry some type of life insurance.

A level term policy provides coverage for a period of two or more years, most commonly in five, ten, and 20 year terms. These policies are more expensive than ART policies but the premiums can be locked in for the entire term. Again, policyholders can renew their policies for an increase in premiums. Many people purchase level term policies to provide affordable coverage for a limited time.

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