Life insurance policies come in a variety of forms depending on the product that is needed by specific individuals. One type of life insurance is a term life policy. This type of policy is offered in a variety of lengths that can range from 10 years up to 30 years. The premiums that are paid on an annual basis vary depending on the factors used to calculate the policy's cost.
A term life insurance policy provides protection for a specific time period, which is the length of the policy. This type of policy is generally cheaper than others because there are little costs to the insurer other than paying the policy benefits. A typical 20- or 30-year term life insurance policy can cost as little as $100 to $200 a year depending on the age of the insured and other health factors.
The rates for term life insurance can vary depending on the age of the individual and the coverage amount when a policy is purchased. The monthly rates for a policy with $500,000 of coverage will generally be lower when a policy is purchased at a younger age. An individual at age 35 can pay $15 a month for a policy. An individual at age 50 will pay almost $45 a month for a policy with the same coverage amount.
Level Term Policy
A level term policy has features that can affect the cost of the policy. This type of policy will maintain the same coverage amount for the life of the policy. The premium that is paid for the policy will also stay the same for the policy's term. This type of policy can have a term that can last up to 30 years. However, one disadvantage of this type of policy is that it is not renewable when the policy term expires.
A renewable term life insurance policy contains an option to renew the policy at the end of the original policy term. Renewable term policies are often sold in shorter terms such as 10 or 15 years. This can be done up to a specific age limit, such as 65 or 70, depending on the insurer. Most term life insurance polices can be renewed for an additional term for a higher annual premium.
A term life insurance policy has no cash value built into the product. As a result, an individual pays the premium each year and builds no value in the policy. Other insurance products, such as a permanent life insurance policy, can be used to receive a return of premium. When a term life insurance policy is canceled, there is no cash value built up and no return of premium. This means that an individual might pay less each year for a term policy but have no other benefits.