Term insurance is the most basic form of life insurance. A term policy provides coverage for a specified period of time (e.g. a fixed number of years, or up to a certain age), and then terminates upon expiry. These policies are most commonly available in 1-, 5-, 10-, and 20-year terms, or up to age 60 or 65. Generally, the premiums of a term policy will remain level throughout period that it is in force. Most term policies are non-participating, and do not include cash values or other non-forfeiture values. For this reason, term policies have lower premiums than those of permanent policies (at least when you are younger).
Most term policies have one or both of the following features:
This means that you can renew your policy at the end of its term, without having to submit medical (or other) evidence of insurability. However, insurance companies providing this feature assume that those who choose to exercise it are doing so because their health has deteriorated since the term began, so they do not want a health check. Thus, premiums dramatically increase after each renewal period. This feature is only available up to a certain age (usually 70 or so).
This means that you have the option to convert your term policy into a permanent policy without having to submit evidence of insurability. However, there are sometimes restrictions on the type of permanent policy you can convert to, or the age limit after which the feature is no longer available.
A Quick Example:
Term 10 Renewable and Convertible
A T10 policy provides insurance coverage for 10 years, with monthly or annual premiums guaranteed to remain unchanged for the duration. If the insured dies any time during this period, the insurance benefit amount is paid out at full. At the end of the 10-year term, the insured has the option (age permitting) to renew his or her policy for another 10 years without proving good health (although at a higher premium). The client also has the option to convert their term policy to a permanent policy, without having to prove good health. This permanent policy could be a Term to 100 (T100), Whole Life, or Universal Life, depending on the guidelines for the specified company. The cost would be based on the age of the client when they decide to convert the policy. Type your paragraph here.