Premium Term Life Plans Can Return Premiums To You

2007-03-08 10:33:40

( Real Estate )



If you have already decided to purchase term life, you can choose among three basic types: annual renewable term insurance, level premium term life insurance, and decreasing term life insurance.

• You have to renew an annual renewable term policy every year, and your corresponding premiums will increase in proportion to your advancing age.

• Level premium term life allows you to fix your cost of coverage over the term and, at the end of each period, the cost will increase. The cost will remain locked in at the new level until the end of the next period. Over the long run, you will find level premium term life less expensive than annual renewable term.

• Decreasing term life is the opposite of annual renewable term life. Your annual premiums remain the same going into the future but the amount of death benefit is reduced.

Level premium term life is appropriate for you if you are buying the policy solely for protection. But if you need a term life policy to cover a substantial debt, like the mortgage on your home, decreasing term life is the better instrument for that. If your need for term insurance cover is very limited, such as to cover the rental obligations in a short term office space lease, an annual renewable term life works out best for you.

In recent years, the premium term life insurance companies have introduced a variation in term products called return of premium term life insurance, particularly designed for the mortgage market. In an ordinary term life policy, you get nothing if you survive to the end of the term. In a return of premium term life policy, you get back the premiums you have paid if you remain alive and the contract has remained in force.

Your cost of coverage will be higher in return of premium term life insurance, however. The cost differential allows the insurance company to invest a portion of your premiums to ensure that the return of premium term life benefit will be delivered to you at the proper time.


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