Before purchasing a term life insurance policy, a consumer should educate him or herself as much as possible, becoming aware of the options available. Knowing some key terms and concepts before visiting an agent may prepare the consumer to better understand the choices placed before them. Otherwise, the terminology and definitions may be confusing and overwhelming, resulting in poor coverage or coverage that is not best for the holder or his or her beneficiaries.

The most popular choice for insurance, especially if it is the holder's first policy, is term life insurance. These policies offer a high benefit amount with a low cost premium. But deciding on this type of coverage is not the end of the decision making. There are two types of term life insurance - level term and decreasing term.

Level term insurance does what its name implies - it remains level the entire life of the policy. The premium does not change nor does the benefit. So, for someone who purchases a twenty year level term policy with a benefit amount of half a million dollars, he or she will pay the same premium every month for the entire term. Likewise, if the policy holder dies at any point in that term, then the beneficiaries will receive half a million dollars. A policy such as this replaces the need to save for the event of an untimely death because mortgages, tuition and other bills will be covered by the policy benefit. However, it is important to note that when the term expires the coverage expires. If the holder has no intention of saving or investing for the unexpected, then he or she should get a renewable policy, as coverage will still be necessary at the end of the current term.

Decreasing term insurance is also true to its name - as the policy increases with age, the premium decreases AS WELL AS the benefit amount. The idea behind this type of policy is that the holder will increase his or her private savings and investments over the years. So, the more money that is saved, the less necessary a term policy becomes. Decreasing the premium over time makes sense, freeing up more money for investing or any other needs the holder might have.

Between the two options, level term insurance is the most common. However, each individual's situation is different, and knowing the options will insure he or she is properly insured.

Author: Zac Parker

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Article source: Free Insurance Articles.