Life insurance at risk 101

When purchasing life insurance, you can choose between two basic types of policies: risk life insurance or permanent life insurance. Subprime life insurance policies provide insurance protection for a period of time, typically one to 30 years. At-risk life insurance provides a death benefit to help your beneficiaries replace their income when they die. For example, the money can be used to pay for things like a mortgage, education fees, or everyday expenses like groceries.

If you are thinking of purchasing life insurance, here is a brief introduction to the main features and benefits.

HOW DOES LIFE INSURANCE WORK?

If you die during the term of your life insurance, your beneficiary receives the death benefit. If you do not die on time, no one will receive the death benefit. And the rewards you paid will generally not be refunded unless you have purchased a term policy with the “Reward Returns” option.

What happens when the deadline has passed?

If your term policy is renewable, you may be able to extend your coverage for another period until a certain age. If your execution policy is convertible, you can convert it to a permanent life insurance policy. Check with your agent for details on convertible policies, as the conversion usually needs to be completed within a certain time frame.

At the end of your tenure, you're likely to pay higher premiums (or regular payments) when you renew or purchase a new policy, according to the Insurance Information Institute (III).

How much does life insurance at risk cost?

The cost of life insurance at risk depends largely on the state of health and the age of the insured at the beginning of the term, specifies III. Deteriorating health or increasing age can make buying a new policy difficult or more expensive as you get older.

ADDITIONAL OPTIONS FOR A LIFE INSURANCE POLICY

Life insurance policies at risk may be classified with term or decreasing term in accordance with III. Fixed-term policies where the death benefit does not decrease are the most common form of risky life insurance, according to III. With decreasing life insurance policies, the death benefit will decrease at certain intervals over the term.

Certain duration rules allow you to increase your premiums during your current period. To avoid future surprises, please read your policies carefully and ask your agent questions in advance.

Finally, some term policies offer a return of premiums option that allows you to have some or all of your premiums refunded at the end of the term, provided you have no claims, says III. However, it should be noted that these insurance premiums are generally much more expensive than the non-refundable premium options.

Taking out life insurance is a step towards securing your family's financial future. Check with your insurance agent to see if the life insurance policy meets your requirements.