Getting term life insurance can help ensure your loved ones are taken care of after you’re gone by providing a death benefit that can replace your income and cover expenses. There are several types of term life insurance to choose from, and each may be suited for different policyholders. Let’s dive deeper into how each type of term life insurance policy works so you can find term life insurance quotes that fit your needs and budget.
Level term life insurance
A level term policy is a type of term life insurance that covers you for a fixed term length. You can typically choose a term length from 10 to 30 years with these policies. If you pass away while the policy is in force, your beneficiaries will receive the death benefit. In addition, premiums remain fixed throughout the policy term, offering more predictable costs for your coverage.
Renewable term life insurance
A renewable term life insurance policy lets you renew your policy coverage without undergoing another medical exam. If you renew one of these policies, you can’t be turned down. But keep in mind that your premiums may increase due to your older age and other factors. Renewable term life insurance is a good option for those who need short term or flexible coverage.
Convertible term life insurance
A convertible term life insurance policy lets you exchange your term life insurance policy for a permanent life insurance policy without undergoing a medical exam for the new policy. As a result, you can secure a permanent policy without risk of being denied. Going this route can provide you with the benefits of lifelong coverage after your term life policy expires. Additionally, you can receive a cash value growth component with your permanent life insurance policy. Part of each premium payment you make will go toward this cash value, which can grow tax deferred over time.
With a convertible term life policy, your premiums will increase when you convert to a permanent policy, but your health may not be considered.
Return of premium term life insurance
Return of premium term life insurance policies refund your premiums tax-free if you outlive the policy term. This coverage can be a stand-alone policy or offered as a return of premium life insurance rider. Just like other types of term life insurance, your beneficiaries will receive the death benefit payout if you die while the policy is active. This type of term life insurance policy often comes with higher premiums, but it can work well if you want your money back when the policy expires.
How to choose the best term life insurance policy
To pick the term life insurance policy that may be right for you, compare each type of policy and consider your needs. For example, level term insurance may be your best option if you prefer affordable, predictable payments over flexibility and don’t mind that the term will expire.
But if you think you’ll want more coverage once the policy expires, then one of the other three policies may be a better choice. A renewable term life policy may work well if you want a lower-cost way to continue extending your coverage. And if you have complex financial needs and want access to lifelong coverage and cash value, you may want to consider a convertible term life policy. Lastly, the return of premium policy term could be a great choice for those that want a refund of their premiums if they outlive the policy.
Ultimately, the ideal term life policy comes down to your budget, life expectancy, and financial plan. Keep these in mind as you do your research and compare quotes to get the right life insurance policy for you and your loved ones.