Term Life Insurance
The Variations of Coverage Available
There are several common policy variations to consider when purchasing term life insurance. These variations in coverage differ from state to state and company to company, but there are a common set of variations that insurance shoppers will come across most often when in the process of choosing a policy.
The first common variation in term life insurance policies has to do with whether the policy's amount of coverage is level or declining. If the coverage is level, it will remain fixed throughout the life of the policy. If the coverage is declining, the coverage will taper off according to a set schedule.
Another common variation is whether the policy is renewable or non-renewable. If the owner of the policy is able to renew the policy at the end of its term by paying a higher premium, the policy is renewable. If the policy is non-renewable, the term life coverage is simply over at the end of the term. A policy with the added option of continuing coverage will most likely cost more than one without that option.
Insurance shoppers should also check to see whether their term life insurance policy is convertible or non-convertible. If the policy is convertible, the policy holder has the option of converting the term life policy to a whole life policy or some other cash value policy. If the policy is non-convertible, the policy holder will not be able to convert the term life policy in any way. As with renewable policies, a convertible policy will generally have a higher premium than a non-convertible one.
Another common variation is a family policy, which means that all members of a family are included in one term life contract. Usually, the primary policy holder is covered by whole life insurance, while the spouse and other family members (including all children, even if born or adopted after the purchase of the policy) are covered on a set term insurance. The premium does not change if more children are born or adopted, or if one of them dies. If the primary policy holder dies, the life insurance on the rest of the family stays in force without payments. Of course, as with renewable and convertible coverage, this type of insurance is available from some companies for an extra price.
A family income policy is another of the common coverage plans offered by certain insurance companies. The family income policy is effectively a type of declining term life insurance that provides surviving family members with a monthly income for a set time period after the policy holder dies. A family income policy may be sold as a rider with a cash accumulating policy, or as an entirely separate policy in itself, which the insured purchases for a set amount of time.
Joint life insurance is a type of policy that covers two lives. These two lives are usually those of the main policy holder and his or her spouse, but the policy generally covers any two lives. The policy pays when the first person covered by the policy dies. The coverage almost always costs less than two separate policies. Contingent coverage is very similar to joint life coverage, but allows for coverage of more than two lives.
Living insurance is one of the most recent variations in coverage. Living insurance is a type of whole life insurance that will pay out a set amount of the face value of the policy should the insured become terminally or otherwise “catastrophically” ill. This type of coverage is offered as a rider for an extra price. It is meant for very ill people who cannot pay medical bills without this payout. Remember, however, that these payouts do take away from the death benefit guaranteed to survivors and may reduce a person's eligibility for federal aid.
