Broadly speaking there are three types of term life insurances prevailing in the present market.
Annual renewable term life insurance
As the name suggests it is the term life insurance that lasts for a year. During the period of one year if the insurer dies then the benefit is paid to the insurer’s beneficiary. But if the insurer dies after even one day of the expiration of the policy, no benefit is paid. The premium is generally calculated on the basis of chances of dying of insurer in the period of one year. As the chances of dying of any person in next year is very less, individual is very reluctant to take this type of term life insurance.
There is one other annual term life insurance which is very popular and is called ART or Annual Renewable Term. In this type of term life insurance you have guaranteed option of renewing your policy even if after one year you are not insurable. You can extend the period up to 30 years or may be up to the age of 95 years. Naturally the premium of annual term insurance increases for each renewal.
Level term life insurance
This is more popular than the Annual term life insurance. In this type of term life insurance the premium remains same for the given period of time. Most insurance companies offer up to 30 years of term. If you want to extend your term period then you can do so by paying the premium which was fixed beforehand.
Return of Premium type term life insurance
This is the latest type of term life insurance, which is marketed by most of the insurance companies. This type of insurance will give back full or partial return of the premium amount if the insurer does not claim, that is the insurer is still alive after the expiration period. Naturally the premium of ROP is more than the usual term life insurance.
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