How Do I Choose the Best Term Life Insurance?

There are five types of term life insurance policies: level, decreasing, renewable, convertible and return of premium. The way to choose the best term life insurance policy is to factor in the age of the individual and the amount of money available to spend, then decide which of the five types is the best term life insurance to purchase. Each type has its own advantages that might make it attractive to people in certain stages of life or under various circumstances.

Term life insurance is the most basic of all life insurance policy varieties on the market. It stands in stark contrast to cash-value policies such as whole life or universal life, which typically charge very high premiums and last for the insured person's lifetime. Term life insurance lasts for a fixed period — typically five, 10, 15, 20 or 30 years. The premiums are generally low, and if the insured person dies during the policy's term, the beneficiary receives a death benefit.

Most life insurance policies require applicants to pass some sort of physical exam to qualify for coverage. In addition, most policies require a repeat of this exam each time that the policy is renewed. Renewable term life insurance allows a policyholder to sidestep this requirement completely, which allows for huge savings in future premiums. This is the best term life insurance to choose for senior citizens or people who have relatively new or worsening health conditions.

Level term life insurance provides a set amount of life insurance for a fixed period of time. The premiums remain stable and predictable, and the cost is relatively low. Decreasing term life insurance is virtually identical to the level type of life insurance, with the only difference being that the monetary value of the death benefit declines steadily over the lifetime of the policy. A policyholder should choose this package if it is early in the person’s life and small children are involved. This is because of the large amount of money that is necessary to sustain children in their early years — a cost that will decline over time.

Convertible insurance allows the policyholder to convert his or her policy from term insurance to whole life insurance without penalties. This is the best option for younger families who are looking to pay low premiums at first but want the option to increase their coverage over time. They might want to do this as their family and life needs change.

Return of premium insurance is similar to level term life insurance as well, with the only difference being that all of the premiums paid over the lifetime of the policy return to the insured if death does not occur during the time of coverage. This is the best term life insurance policy to choose if a person simply wants to protect his or her family but does not anticipate death during the term for which they are insured.