There are generally two types of life insurance--term life insurance and whole life insurance. Term life insurance is exactly what the name implies in that it is merely life insurance for a certain term. At the end of the term, a new policy will need to be purchased if continued life insurance is requested.
Time Frame
Term life insurance policies are typically available in terms of one year up to 30 years. The premiums will stay the same during this time period, but when a new policy is purchased at the conclusion of the term, the premiums will be higher, as the age of the insured will have increased.
Significance
Two reasons why term life insurance policies are popular is that they will typically be less expensive than a whole life policy and that they can be acquired when they are needed most. Term life insurance policies do not have any cash value except with the death of the insured, and as a result will be cheaper to purchase. The policies can be purchased for times when they could be most useful, such as to repay a loan or to cover the cost of raising a child. New policies can be taken out for a lower benefit amount if the insured person survives through the repayment of the loan or the raising of the child.
Types
There are several different types of term life insurance, such as renewable term, in which the amount of coverage stays the same each year, but your premiums will increase on an annual basis as you get older. Straight term, in which the amount of coverage and premiums stay the same throughout the life of the policy, and decreasing term, in which the amount of coverage decreases over time while the premiums remain the same, are also available.
Potential
Another type of term life insurance policy available is the Return of Premium. A Return of Premium policy is a fairly new component to the life insurance world and was created to appease those people who felt that term life insurance was essentially throwing money away, as long as they outlived the policy. What a Return of Premium policy does is return the amount paid if the insured party does not die before the term is up. The drawback, however, is that these type of policies cost significantly more than a standard term policy and have to be held for a number of years to see a return of the premiums paid.
Warning
When you reach the age of 80, the majority of companies will no longer sell you a term policy. Some companies will insure you to 85 or 95 years old, however, so it's worth a bit of planning if you are of retirement age and purchasing a term life insurance policy. Finding a company that will insure you if your term policy expires when you are over 80 may be an important feature depending on your individual situation.
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