Term life insurance is the most affordable way to purchase a substantial death benefit for a limited period of time. Term life insurance is temporary insurance. The policy provides coverage at a fixed rate and has a set and defined limit on the coverage period. Once that period expires, coverage is no longer guaranteed at the previous premium level, and the client must get the policy renewed or lose coverage. If the insured dies during the term, the benefit is paid to the beneficiary. The stated benefit is issued upon the death of the insured, provided that he/she dies within the specified time period.
Each year, a premium is paid to cover the risk of death during that year. Term life insurance has no cash value. The only way to collect anything is to die before the term life insurance expires. If death occurs, the life insurance beneficiary generally collects the death benefit of the life insurance policy, free of income tax.
Guaranteed Level Term Life Insurance is the most common type of term life insurance. It is popular because of the extremely low cost and long term coverage it provides. These types of life insurance policies have premiums that are designed to remain level for a period of 5, 10, 15, 20, 25 or even 30 years.
Return of Premium Term Life Insurance (ROP) is a type of life insurance policy that offers a guaranteed refund of the life insurance premiums at the end of the term period, assuming the insured is still living. This type of term life insurance policy is a bit more expensive than traditional term life insurance, but the premiums are designed to remain level. They are often significantly less expensive than Whole Life types of life insurance, yet, like many Whole Life policies, they still may offer cash surrender values if the insured doesn't die. Return of premium term life insurance policies are available in 15, 20, or 30-year terms.
Annually Renewable Term Life Insurance (ART) is a type of term life insurance policy that has increasing premiums. The premiums increase each year to reflect the probability of your death in any given year. This type of term life insurance policy is unpopular and usually only purchased when the coverage is needed for one year or less. This happens most often in business deals.
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