Types of Term Life Insurance: Depending on the amounts of the benefit to be paid and the options for renewal or conversion to another type of Life Insurance, Temporary Insurance or Term Insurance may be the following.
5 Types of Term Life Insurance
1. Level Life Insurance Level
Characteristics: It provides a fixed amount of protection for a certain time and after the expiration of that period the policy is considered completed.
It is a leveled premium because the amount of payment to the beneficiary is the same throughout the term of the insurance and is fixed because the premium is not increased, the amount to be paid is the same as the contract in the stipulated terms. The annual premium can be divided into monthly, quarterly or half-yearly payments with an interest rate.
Advantages: The biggest advantage is that the term of coverage is established and it is ensured that the premium will not suffer increases until the expiration and the payments will be equal from the beginning to the end of the insurance contracted.
Modality: These are the insurances known as Life Risk Insurance, its objective is to guarantee a capital to cover the economic damages suffered as a result of the death of the insured.
It can be a Term where you choose the time, that the insurance covers the risk of death. The premium is characterized by being periodic and constant. The payment is always established, that the death occurs during the validity of the policy. The minimum of the premium is 1 year and the maximum is 51 years. After the first year, the insured can request the increase or decrease of the capital of the insurance.
2. Renewable Term Life Insurance
Characteristics: It provides a fixed amount of protection for a specific time and after that period has expired, the insured has the option to renew. The number of renewals may be limited by insurers and a health examination is not necessary for renewal.
If the parties agree, it is renewed automatically on an annual basis up to 65 years in general. The initial capital is adjusted annually according to the CPI. The premium to be paid is evaluated according to age, sex and the increase in the CPI. You can also contract with a constant premium.
Advantages: Perhaps the most accepted because it is the most economical. Only the risk is paid according to age. You can contract a one-year coverage with the possibility of extending. The capital is updated by the IPC, which ensures the capital update.
3. Convertible Term Life Insurance
Characteristics: It provides a fixed amount of protection for a specific time and after that period has expired, the insured has the option of converting or changing from a Term Insurance to a Permanent Insurance. In the case of choosing the conversion option, you will be exempt from taking a medical examination to change your policy. The cost of the premium can be increased up to 20%.
Advantages: The combined insurance allows the insured to establish the policy according to your needs. Life insurance is combined with a fixed term insurance, for example during the period where the children are minors.
El capital will contract the insured needed to maintain economic tranquility of your family in case of his death, always considering your income, expenses, a standard of living, etc.
4. Declining Term Life Insurance
Characteristics: The amount of what the policy will pay decreases during the protection period. It is common to take this insurance to pay the balance of a housing mortgage in case of death of the insured. The duration of the insurance will be the same as the mortgage. The capital guaranteed in case of death will go to the bank where the credit is paid. The premium to pay remains constant throughout the contract.
Advantages: This life insurance is very convenient for family protection against a debt such as a mortgage loan, guarantees the beneficiary that in case of death for any reason his economy would not be affected.
Modality: This insurance is also known as Loan Amortization Insurance and is aimed at people who hire a loan and want to be covered financially in the face of a deadly situation. The insurance takes over the outstanding debt. The payment of the premiums is annual, the minimum age is 18 years and the maximum 64 years and the insurance must be contracted for 3 years.
5. Increasing Term Life Insurance
Characteristic: The benefit of the policy or the amount that the policy will pay in case of death is increased periodically during the term of the policy. The policies are paid upon the death of the insured or on the due date in the event that the insured remains alive. This can be regulated by the inflation index or be established in a fixed annual increment in the contract.
Advantages: The first advantage of this type of insurance is to be able to establish the term of coverage at the time of contracting and with the assurance that the initial capital will not be devalued with the passage of time thanks to the annual increase in insurance. It is a kind of savings account with insurance and is usually designed to cover education expenses or as a pension after retirement.