Convertible Term
A term policy that is convertible allows the policyowner to convert or exchange the temporary protection for permanent protection without evidence of insurability. Usually, this conversion feature is used to convert term insurance to some form of whole life insurance. If the conversion privilege is exercised it will be at the attained age, meaning the premium paid for the new policy will be based on the insured’s age at the time of conversion. Like the renewability provision, the conversion privilege must generally be written into the contract and spells out the terms of the policyowner’s right to convert.

At the time conversion to permanent insurance is made, the insured generally has a choice of two ages: the present age (called attained age) or the age at the time the original term policy was purchased (called original age). Premium amounts depend to some extent upon the age of the insured. If the insured converts to permanent insurance using original age, the premiums will be lower than if attained age is used. When using original age, the policyowner must pay an additional sum, usually consisting of the difference between the lower term premiums over the years, and the higher premiums he or she would have been paying if thepermanent protection had been bought originally. The policyowner is also required to pay the interest that the insurance company could have earned on those higher premiums, if it had invested them for those extra years.

By paying the difference in back premiums and interest, the policyowner is building an accumulated value in the policy much more quickly than if he or she simply begins paying the higher premiums as for the attained age. The cash value will be well on its way to a meaningful amount. Some life insurance companies place a time limit on the conversion privilege. This limit is usually based on the expiration date of the original term policy. The number of years excluded from the conversion privilege on a convertible term policy varies from company to company. For instance, some companies state that the policy must be converted as much as 5 years before expiration of the original policy, after which point, the right to convert is lost.

Reentry Term
A reentry option (also known as reissue) is also a common feature of term policies. This option gives the insured the opportunity to provide evidence of insurability at the end of the term in order to qualify to renew the policy at a lower premium rate than the guaranteed rate that is available without evidence of insurability. Essentially, the renewing insured is reviewed as a new applicant for term insurance.

Level Term
Level term provides a level death benefit and level premium during the policy term. For example, if an individual purchases a 10-year term policy with a face amount of $100,000, both the premium and the face amount will remain constant for the entire 10-year period. Assuming the level term policy is issued as renewable and convertible, every time the policy renews for a subsequent term period, the policy’s premium will increase due to the increased age of the insured. For example, an insured has purchased $50,000 of 1-year renewable and convertible term insurance. Each year the policy is simply renewed at the same face amount by the payment of the new, higher premium. A new application is not required nor is a new policy issued. The only thing that changes is the age of the insured and subsequently the policy’s premium.

Decreasing Term
the date of policy expiration. The annual premium for a decreasing term policy remains level during the term of the policy. A common use for decreasing term insurance is to cover a home mortgage. The policy amount decreases each year at the same rate as the balance on the mortgage. Decreasing term is usually written as convertible but generally is not renewable at the end of the term period. The convertible feature allows the policyowner to convert to permanent insurance usually at any point during the decreasing term of the policy for the available amount of insurance at that point in time. Mortgage life insurance is an example of decreasing term.

Increasing Term
Increasing term is another type of term insurance, which is not used as often as level or decreasing term. Increasing term is basically the opposite of decreasing term. The death benefit increases over the life of the policy, and the premium remains level.

Indeterminate Premium Term
Indeterminate premium term is a type of term insurance where the premium may fluctuate between the current premium charge and a maximum premium charge that is stipulated in the insurer’s premium tables, based on the insurer’s mortality experience, expenses, and investment returns.

Interim Term
When a person wants immediate protection and is thinking of starting a permanent insurance policy in the near future, interim term may be used to cover the period of time before permanent protection is to begin. Many companies write interim term on an automatically convertible basis. That is, they provide the insured with temporary term protection that will covert automatically at some future date, usually no later than 11 months. The premium for the interim term is based on the age at application. The premium for the permanent coverage is also based on attained age when permanent protection begins.

Continued>>>>>>>>