Term insurance is short term in nature and provides protection for usually one year. This is the cheapest form of insurance that is available albeit the catch is that you do not get anything if the term expires. This type of insurance can be renewed periodically and requires lesser amount of premiums to be paid.

• The most basic type of term life insurance is for a term of one year. The death benefit will only be paid by the insurance company if the insured dies within that one year. However if the insured dies one day after one year the insurance company is not obligated to pay anything. The premiums for such type of insurance are calculated by using the expected probability that the person will die within a year.
• A type of term life insurance is Annual Renewable Term (ART) in which the insured renews the policy. Renewal can continue for ten to thirty years; however since the premiums for the policy gradually increase over time the policy becomes financially nonviable after a certain period of time. Since the probability of dying increases with age the premiums also increase.
• Generally a term insurance is rarely purchased for one year since the likelihood or probability of some one dying within a year is low. However, a disadvantage of such policies is that if purchased for a short period of time they may prove useless to someone who develops a health condition during the period of the policy. This will make renewal of the policy almost impossible and the person may end up without any insurance after the term expires.
• Another type of term insurance is the level term life insurance which is more popular compared to annual renewable term insurance. In this type of insurance the premium does not fluctuate or increase but remains the same for the complete term of the policy. The policy can be for ten, twenty, or thirty years and the amount of premiums are directly proportional to the length of the contract.
• The majorities of level term programs comprise of a renewal choice and permit the insured to renew for a highest guaranteed rate if the length of the insurance needs to be extended. However the catch is that evidence of insurability may be required for renewing the contract. The terms and conditions of the contract will state if there is any need of evidence of insurability under normal circumstances.
• Term life insurance as well as permanent life insurance uses the same exact mortality tables to calculate the risk and the premiums. However the premiums for term insurance are very different from permanent life insurance. The common features between these two types of insurance include an income tax free death benefit.
• The premiums of a term insurance and permanent life insurance differ since permanent life insurance must pay out eventually. On the other hand term life insurance may expire without paying out anything if the insured party survives the term. Therefore it is important to choose wisely when it comes to making a decision between term and life insurance.

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