Term product types

Compare three separate features

Term life insurance protects against death during a specified period and ordinarily builds no cash value. Identify the death-benefit pattern, the premium pattern, and the rights to continue or change coverage separately.

Death-benefit patterns

Level term keeps its death benefit constant during the term. A twenty-year policy might provide $500,000 throughout the twenty years. Level benefit does not itself promise a level premium, although many contracts provide both for a stated period.

Decreasing term reduces the death benefit on a schedule. It can match a declining need such as an amortizing mortgage. Premiums can remain level even while benefits decrease. Increasing term raises the benefit according to a schedule or formula to address a growing need. Increasing premiums alone do not make a policy increasing term.

Continuing or changing protection

Annual renewable term covers one year at a time and allows renewal under the contract without new evidence of insurability. Premiums generally rise with attained age. An attractive initial premium does not mean the same price will apply through many renewals.

Renewable term continues term protection. Convertible term permits an exchange for eligible permanent coverage without new evidence of insurability. Conversion can preserve an opportunity for permanent coverage after health worsens, but does not preserve the term premium. The new premium reflects the permanent product and the applicable age basis, commonly attained age. A contract may be both renewable and convertible. Contract terms control deadlines, age limits, eligible products, and premium basis.

Return-of-premium term

A return-of-premium feature conditionally refunds specified premiums if the insured survives the stated term and meets the contract requirements. It generally costs more than comparable term without the feature. Ordinary term generally pays no survival benefit at expiration; a refund feature does not promise that every charge is refundable.

Exam approach: Falling benefit means decreasing term; annual renewal identifies a coverage period; renewing continues term; converting changes it to permanent coverage.