Are there different types of term life insurance polices?
Free Insurance Comparison
Secured with SHA-256 Encryption
Asked February 3, 2012
The only thing that all term life insurance policies have in common is that they are all written for a specific period of time. Beyond that, the laws of each state and the company procedures of each insurance company open the door for a lot of variation. For example, some policies will have exclusions that others do not have, the length of the policy can be between 1 and 30 years, and the cost of the policy will go up or down according to the location where the policy was purchased.
Term life insurance policies are similar, but different. Each insurer will have their own procedures to define the policy and include exceptions and exclusions that have been developed by the company. These changes are written into the policies to help provide coverage to a broad range of people without driving up the average cost of premiums to the point that no one can afford coverage at all. The idea that insurance companies do these things to get out of paying claims is a myth, and most insurance agents will make certain that you are getting the type of policy you need and that you understand the limitations of the policy you are buying.
There is a special type of term life policy, sometimes called mortgage insurance that has a lower pay out over time. This type of policy is primarily intended for paying off a mortgage if the household breadwinner dies, and takes into account the fact that the remaining mortgage balance decreases as payments are paid.
You can also purchase single premium term life policies where the full amount of the policy is paid for at signing, with nothing else due on the policy. The advantage of this type of policy is that you don't have to keep up with when premiums are due, and the disadvantage is that you have to pay a significant amount of money initially. Single payment policies are the least expensive type of term life in the long run, but can be prohibitive in the short term.
Answered February 3, 2012 by Anonymous