So you’ve decided you want the security, financial stability and peace of mind that comes with owning life insurance. Knowing how important it is to get insurance that works with your needs, you’ve carefully studied the major types of insurance policy and decided that term life insurance is right for you. But now that you’ve decided, you’re faced with another daunting question: annual renewable term or level term? What kind of term life insurance is best for you and your loved ones? What’s the difference between them, and why should you buy or avoid each? If you’re looking for answers, look no further. To learn what the best term life insurance for your family is, all you have to do is read on!
Like any life insurance policy, an annual renewable term plan will provide a death benefit to a beneficiary of your choice if something fatal happens to you. This type of policy only lasts for one year at a time and offers incredibly low initial premiums. In fact, annual renewable term insurance policies offer the lowest initial premiums of any insurance policy, making it the most affordable policy type to buy.
If you’d like to make sure you will be reinsured, you’ll be happy to know that annual renewable term policies usually guarantee you’ll be eligible for policy renewal year after year. However, there are a few risks you’ll want to know before you decide to buy. Annual renewable term policies are great for very short needs, but be careful! Though their premiums will start out affordable and easy to manage, they will increase yearly if you decide to renew them. After a set amount of years (differing with each policy,) the rate of increase will also go up, meaning after a while you’ll find yourself paying premiums that are much higher than you originally intended to!
Annual renewable term insurance is perfect for anyone who has an immediate need to be insured, but you expect to be able to cover yourself in the near future. For example, if you have an expense coming up that you know you’ll be able to pay back within the year, annual renewable term insurance may be for you, as it’ll only cover you for the time you need it. You may also be interested in this type of policy if you know you’re about to do something dangerous during a set period (like a risky job,) and you want to be covered for it. You’ll want to avoid annual renewable term policies if you need the insurance for a longer time than just a couple of years. Though they start affordable, the annually rising costs will accumulate quickly.
Level term plans are the more common of the two term life insurance types. These plans offer death benefits for a fixed, multi-year period (usually of 10, 15, 20 or 30 years.) The main feature of level term policies is the fact that unlike annual renewable term policies, your premiums will stay fixed year after year, for as long as the policy lasts. For example, if you get a 20-year plan, you can expect to pay the exact same premium for the entire 20-year period. No surprise increases!
Your premium stays stable with a level term policy, but that premium will also begin higher than an annual renewable term. Additionally, if you decide to renew the policy once it ends, your premium will go up (but once it does, it’ll stay fixed throughout the policy’s duration.) However, while level term policies do start out more expensive than annual renewable term policies, they’re also much more affordable than the permanent insurance of a whole life policy.
Level term insurance is for you if you’re planning for an expense that you know will last a few years, but not your whole lifetime. If your child is planning to head off to college, you’re looking to buy or build a house, or you’ve just gotten a family car, level term insurance might be for you. Avoid these plans if the fixed periods offered are much too long for your need, as you could end up paying for insurance you no longer want. Level term policies are perfect for anyone who wants to be covered for a set period.
Both annual renewable term and level term policies have clear benefits and downsides, strengths and weaknesses. Both often have the option to be converted to permanent insurance plans in the future, and both are just right for a specific selection of needs. So what is the best term life insurance for you and your loved ones? This is a big decision, and we hope we’ve given you a better idea, but in the end a choice like this needs an expert opinion. Luckily, we at Termlife-insurance.com are here to help! We offer free, fast quotes, and our team of agents can give you the assistance you need to get the best term life insurance coverage for your situation.