Level Term Life Insurance
Buying level term life insurance is simple. There are several different types Each has a different need and purpose. Let's start with the cheapest:
- Annual renewable term is so low it can be very tempting. But the premium increases every year and if you keep the policy for a long time it be very expensive. The death benefit remains level. If you need life insurance for a short time, this could be perfect.
- 5 Year Level Term Life Insurance is for a short term need and has a level death benefit. The premiums never increase. This is also cheap life insurance coverage. This can be used to cover an outstanding (car or college?) loan or guarantee that a financial goal even if the insured dies. Assume you plan to pay for college education for a child who starts in 1-2 years. Even if you died, your child would still get their college paid for.
- 10 Year Level Term Life Insurance cost more in premiums but has a death benefit and level premiums for 10 years. It's fairly cheap and can be used to cover outstanding loan balances, funding buy sell agreements in the early years of a business or certain family needs. Like most term, 10 year can be converted to permanent insurance during the life of the policy.
- 20 Year Level Term Life Insurance is one of the most popular even though the premium is a little more than 10 year term but also remains level for the duration. This policy can also be converted to a permanent type at any time. Some creditors use this for their floating debt. In case of death, the bank will get back their money. If a business has valuable key employee, they may buy a policy on their life so that adjustment will be easier if the person expires. 20 year level term life insurance policy is also used because children spend about 20 years in the household before going onto college.
- 30 Year Level Term Life Insurance is used for similar reasons as the 20 year term, but is used more to mortgage and other long term debt. The death benefit also remains level for the duration as does the premiums. This policy can also be converted.
These are is most well known and purchased types of term life insurance policies. The last three are the most common.
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