CARD T072
Term Life Insurance
Life insurance providing protection for a stated period. A 20-year term policy is a familiar example.
How it works
Term life is designed for a defined coverage period and generally has no cash value. A covered death during that period triggers the death benefit. Surviving the term ordinarily does not produce a payout unless a separate return-of-premium feature applies. Renewal and conversion are distinct rights that may extend protection. [20]
A parent chooses 20-year term to cover years of financial dependence. If the policy expires with the insured alive and no refund feature, there is no ordinary maturity payment.
Term describes duration. It does not by itself promise renewal, conversion, or a premium refund.
CARD T073
Level Term Insurance
Term coverage with a death benefit that stays constant during the stated term. Premium guarantees must be checked separately.
How it works
Level term keeps the face amount constant for the specified term. Many familiar products also guarantee level premiums for that period, but the word level should be tied to what the question describes. A level death benefit does not by itself mean a premium can never increase after the guaranteed period. [20]
A policy pays $400,000 for a covered death in year 2 or year 18 of its 20-year term. Its renewal premium after year 20 may differ even though the previous benefit was level.
Check death-benefit guarantees and premium guarantees separately.
CARD T074
Decreasing Term Insurance
Term coverage whose death benefit declines according to a schedule. It can be used for a shrinking financial obligation.
How it works
Decreasing term reduces the death benefit according to the policy schedule. It can match an obligation expected to shrink, such as a loan. The scheduled benefit does not necessarily track every change in actual debt. Premiums may remain level even while the benefit falls. [20]
A benefit declines from $200,000 to $150,000 on its schedule. The owner should compare that schedule with the actual remaining debt rather than assuming they always match.
Decreasing refers to the benefit; it does not necessarily mean the premium decreases.
CARD T075
Annually Renewable Term Insurance
Term insurance renewable one year at a time under its renewal terms. Premiums commonly rise as the insured ages.
How it works
Annually renewable term (ART) provides term life coverage in one-year periods. Within the policy’s renewal limits, the insured can continue coverage without supplying new health information. The price commonly increases as the insured gets older. “Attained age” means the age reached at renewal, rather than the age when the policy was first purchased. Annual renewal therefore does not necessarily mean a new medical review each year. [22]
An eligible insured renews for another year after a health change. The new premium is higher under the age-based renewal schedule.
Guaranteed renewal and guaranteed level premium are different promises.
APPLY THE TERMS
Practice questions
Select an answer, then check it to see why each option is right or wrong.
T072 · Term Life Insurance
0 of 3 answered
T073 · Level Term Insurance
0 of 3 answered
T074 · Decreasing Term Insurance
0 of 3 answered
T075 · Annually Renewable Term Insurance
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Sources & further reading
Original explanations and practice scenarios informed by the following regulatory, legal, and product resources. State examples are not presented as nationwide deadlines or requirements.