Term Life Insurance

Thursday, April 24, 2014
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FAQ’s: Life Insurance

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What is the advantage of level term life insurance vs. yearly renewable term life insurance?

 
The advantage of level term life insurance is that the premiums remain level over a specified period of time. Yearly renewable term life insurance has a lower initial premium; however, the premium rises each year. Yearly renewable term life insurance is only cost effective for a few years because of the rising premiums. If you need term insurance protection for more than a few years, then a level term life insurance policy can cost less.

Please carefully consider the length of the level premium period that will suit your needs. For example, if the primary purpose of the death benefit is to provide income to support very young children and/or to fund college education expenses, a 20-year level premium might be appropriate. If these children are already in their young teens, you may need only a 10-year level premium (longer level premium policies are more expensive).

After the level premium period expires, most policies require you to re-qualify with medical underwriting in order to receive a favorable premium. If you do not or cannot re-qualify, the premium typically rises dramatically after the expiration of the level premium period.