Term Life Insurance Definition? Types of Term Life Insurance

What is term life insurance?

Term life insurance is one kind of agreement between a policyholder and insurance company for a specific time period. It's a type of life insurance that pays stated death benefits to the nominated beneficiary if the insured person dies accidentally during the period of the agreement.

As term life insurance is for a specific period, before letting you join in term life insurance agreement the insurance company will check your occupation, driving record, family history, Lifestyle, medications, smoking status and your hobbies also.

Points to be noted about term life insurance

If the insured person doesn't die during the time, then the nominated beneficiary won't get the death value. But the insured person can renew the term life insurance again. Most of the times people become interested in term life insurance.

Because an insured person has to pay a less annual premium for term life insurance than permanent life insurance. But they don't understand that if the insured person dies without renewing the term life insurance, then the nominated beneficiary won't get a single penny from the insurance company.

So if you care about the safety of your family members, then we highly recommend you to purchase permanent life insurance. Term life insurance is for those people who have a financial backup and want to have extra security for the family members.

Coverage of term life insurance

As you already know that life insurance is the most amazing service that ever invented. It’s the only service that converts pennies into dollars and the dollar is delivered when your family members need it most. But before buying life insurance, the most important question is “ How much coverage do you want?”

Let’s make the concept totally clear. If you die once without renewing term life insurance, there are no do-overs. Your family will be screwed only because of having an agreement of short period coverage. Everyone knows that nothing can replace a father and mother or a husband and wife. Actually, life insurance replaces the economic value of human lives.

Different insurance companies have different types of coverage according to their terms and conditions. While you are choosing a term life insurance, you must choose the insurance company where you will get the highest benefit from coverage with a low annual premium.

How term life insurance works

Term life insurance is certainly the most affordable insurance agreement. But the facilities of term life insurance is now one-third of 20 years ago. Term life insurance ensures 100% money-back guarantee.

Even if you don’t die within the period of term life insurance agreement, they will return 30-40% of your premium after finishing the deadline with some profit or if you die before the time is up, your family will get the full money of life insurance which will be also income tax-free.

Types of term life insurance

There are three types of term life insurance in most countries. You must purchase term life insurance depending on the coverage and highest benefits.

01. Level term policies

This type of term life insurance provides coverage for a specific time (From 10 years to 30 years). The annual premium is higher than the yearly renewable term (YRT) policies. The death benefit will be fixed in the agreement. This type of term life insurance only can be renewed before the deadline of agreement. As the agreement is for 10 to 30 years, you won't be able to renew the policy.

02. Yearly renewable term (YRT) policies

This type of term life insurance doesn't provide coverage for any specific terms. Because the insured person has the right to renew the insurance policy each year. As a result the premium changes in each year depending on the insured persons' age.

03. Decreasing term policies

As the premium of this type of policy is lower than the yearly renewable term (YRT) policies, the facilities and death benefit is decreased each year depending on the premium and insured persons' age.

Some disadvantages of term life insurance

In most cases, term life insurance is for 20 or 30 years. So, one thing you need to know that if you don’t keep this policy for 30 years, you won’t get your money back. So please don’t buy this kind of policy unless you are sure that you can run this policy until last.

When term life insurance crosses the deadline, you will have to double your premium if you want to continue term life insurance. But in most cases, you won’t be able to continue it longer. The only way to collect the whole money is you have to die with your policy within a short period. Then your family will get the death value of your agreement.


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