Term Life Flashcards
How does term life insurance differ from permanent life insurance?
Term life insurance provides coverage for a set period and has no cash value, whereas permanent life insurance offers lifelong coverage and typically includes a cash value component.
What are the basic types of term life insurance?
The basic types are level term (death benefit remains constant), increasing term (death benefit increases), and decreasing term (death benefit decreases over time).
What is level term insurance?
Level term insurance has a death benefit that remains unchanged throughout the policy term and offers level premiums for a set period.
What is annually renewable term (ART) insurance?
ART is a form of term insurance where the death benefit remains level, but the premium increases annually based on the insured’s age.
How does decreasing term insurance work?
Decreasing term insurance features a death benefit that reduces each year, typically used to cover decreasing debts like mortgages.
What is return of premium (ROP) term life insurance?
ROP term life insurance refunds the premiums paid if the insured survives the policy term, offering pure protection with a higher premium.
What are the key features of most term insurance policies?
Most term insurance policies include options to be renewable, convertible, or both, allowing for extended coverage or conversion to permanent insurance without proof of insurability.
What does the renewable feature in term insurance entail?
The renewable feature allows the policyholder to renew the policy at the end of its term without proving insurability, but with premiums based on their current age.
What is the convertible feature in term insurance?
The convertible feature allows the policyholder to convert the term policy into a permanent one without proving insurability, with premiums based on their age at conversion.
At what age is term life insurance generally not renewable?
Term life insurance usually has a maximum age limit beyond which coverage cannot be offered or renewed, often set around age 65 to 70.
What happens if the insured outlives the term of a term life policy?
If the insured outlives the term, the policy expires and no death benefit is paid; the policyholder typically receives nothing unless it’s a Return of Premium (ROP) term policy.
Can term life insurance have a cash value or investment component?
No, term life insurance does not accumulate cash value or have an investment component; it provides only death protection.
What happens to the death benefit in a decreasing term life insurance policy?
In decreasing term life insurance, the death benefit decreases over time, often aligning with the diminishing balance of a debt or mortgage that the policy is covering.
How does the premium of an annually renewable term (ART) policy change over time?
The premium of an ART policy increases annually, reflecting the rising risk of death as the insured ages.
What is the primary use of decreasing term life insurance?
Decreasing term life insurance is primarily used to cover debts that decrease over time, like a mortgage, with the death benefit reducing accordingly.
