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3 types of Term Insurance
- Level __
- Increasing /
This insurance provides protection that remains constant for the term of the contract. The premiums may increase upon renewal due to an increase in the insured's age. This is known as step-rating.
This insurance provides protection which decreases each year.The most common use for decreasing term insurance is to cover a need that will decrease over time, such as a mortgage and other loans. The premiums stay level for the term of the contract. It is a method of leveling off the cost of insurance so as NOT to have it increase each year until it might become unaffordable.
This insurance provides protection which increases each year. It is never sold as a separate contract. Primarily it is used as a rider in connection with a combination or package policy. The premiums stay level even though the coverage increases.
1. Renews yearly
2. Premiums increase yearly
3. 5 year renewal = 5 year increase in premium
Annual Renewal Term
1. Increased premiums
2. All premiums are returned at end of terms.
3. This can also be a rider aka Return of Premium rider
Return of Life Policy (ROP)
1. Renewable without proof of insurability.
2. Premiums increase based on age.
Special Features of Term Insurance
1. Allows conversion from term to permanent insurance without proof of insurability.
2. Must be same company and same amount of coverage.
3. Attained age is used for calculating the gross premium.
1. 1-year Term (least expensive)
2. 1-year renewable term (a little more expensive that the 1 year term)
3. 1-year renewable and convertible term (most expensive
Hierarchy of Premiums
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