Introduction
Term insurance premium is that amount of the policy which is paid at regular intervals. As
term insurance is a temporary insurance, so every year, one needs to pay the premium to cover the risk of death during that year.
Term insurance has no cash value, so, in the event of death, the death benefit is to be collected by the beneficiary.
The rule
Each year, the
term insurance premium climbs up, as day by day the risk of death increases. Although this coverage can again be accessed by
Annual Renewable Term (ART), which is a
term life insurance policy where one can renew his policy.
Premium term
Term insurance companies normally offer various levels of
premium terms. Premiums are usually planned to remain level for a period of 5, 10, 15, 20, 25 or even 30 years. All these premiums types are comparatively less expensive in nature. Most of the
term level premium policies requires a guarantee of level premiums.
Most
level term insurance premiums comprise a renewal option and permit the insured to renew for a maximum guaranteed rate.
Annual renewable term insurance
Annual renewable term insurance policy can be a beneficial option, for those who want to maintain a tight budget and at the same time want to save their immediate relatives in the event of an emergency or crisis. Normally this policy is of two types. Fixed and renewable. Fixed premiums are those, which remains same during the coverage period. Renewable premiums are periodically adjusted based on certain conditions as laid by the company. But normally, the annual renewable term insurance policies automatically are renewed on an yearly basis. The cost of the premium gradually rise, as one becomes older. This is because chances of dying increases as one becomes older.
In comparison to other permanent type policies, this is a less expensive policy, if purchased for a short period. Normally people opt for this policy for temporary use.
Renewable term insurance policy
Renewable term insurance policy allows the policy to be renewed for another term period. The policy will automatically be renewed for another term period upto a maximum age limit, if the premium are paid at a regular interval. The premiums are comparatively cheaper. Although the premium rates slightly differ from company to company.
Convertible term life insurance policy
With this policy, one can convert their term insurance into other policy types as offered by other providers. It can be a rational choice, if someone bears children, mortgage, or undertakes any substantial expense.
Term Life Insurance with Return of Premium (ROP)
Term life insurance with return of premium (ROP) is a product that blends the benefits of traditional term life insurance with a return of premium feature. At the end of the period, full payment of premium will be returned. Generally, during the level premium period, the term insurance company invest the portions of the premium for capital growth. For this reason, it makes possible to return the premium value at the end of the level premium period. But if the insured dies during the coverage period, the death benefit will be paid as with traditional term life insurance, i.e., without a return of premium. If the insured lasts beyond the term period, then no death benefit will be given. Normally, no cash values or loan values are given for term life insurance. Although some return of premium products permit for loan on a certain percentage.
Decreasing term insurance premium
In this case, the amount against death benefit protection coverage, will decrease over time. The premiums for any decreasing term policy normally remain same throughout the term period.
A comparison
The premiums for any permanent insurance are normally higher than other term insurance policies. Term insurance basically provides protection only for a limited period of time and normally does not make any cash value.
Return of Premium feature
A Return of Premium feature normally refunds all or some of the premium one paid for the term insurance at the end of the term period or at end of the term coverage period, provided no death benefit is paid during that period. The characteristics of the return of premium feature sometimes vary depending on the term life insurance policy one purchases.
Premium mode
Almost every company offers a variety of premium modes like annual, semi-annual, quarterly or monthly. But before choosing any of the above, one should always keep in mind that if one decides to pay an annual premium and then settle to terminate the policy before the term ends, then the insurer does not need to refund any portion of the premium he already paid.