A life insurance policy is evidence of a contract between two parties; one party is the life insurance company and the other party is the policy owner. Under a term insurance policy, the insurance company promises to pay the sum insured, if the life insured dies within the period specified in the policy; if the life insured is alive at the end of the period, the policy terminates on that date and the life insurance protection ceases.
1. Increasing term
Increasing term insurance might be employed in situations where the liability being protected against is both temporary and increasing; for example, such a policy might be used to protect the value of a key employee in an organization, where the employee’s salary is expected to increase every year. With this type of policy, the annual premium generally increases in step with the increases in the face amount of insurance coverage.
2. Decreasing term
A decreasing term policy or rider provides for the payment of a fixed monthly benefit from the date of the life-insured’s death to a fixed future date, such as the 20th anniversary of the date of issue. Such a decreasing need might also be to guarantee additional monthly income until the youngest child is through school.Generally, premiums for term insurance policies are for the same amount for each and every year of the term; this is also the case for decreasing term policies.
3. Fixed-period term
Term insurance policies are commonly issued for specified periods, such as 1, 5, 10, 15, and 20 year; they are often issued to terminate at a specified age of the insured, generally at age 65.
4. Renewability and convertibility
This right to convert without evidence is provided in the term policy, regardless of changes in health or occupation. Renewable term insurance normally is identified as such at the time of application. You must understand that, at each renewable period, the premium goes up, because the person has got older.
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