Have you already decided that term life is your preferred option over whole life? If so, it would be a mistake to think that your life insurance selection process is already complete.

If you were to ask the question, “Are there different types of term life insurance?,” the answer would be a resounding “Yes!” There are two basic types to consider, but about a half-dozen types when you get to a more detailed level.

Two Basic Kinds of Term Life Insurance

What are the two major classes of term life insurance mentioned above? Annual renewable term and level premium term.

All term life policies give you a fixed rate within a specified time period and pay out to the beneficiaries should the policyholder pass away during that period. The difference, then, between annual renewable and level premium is whether or not your term extends beyond a single year.

Common multi-year terms would be “good round numbers” like 5, 10, 20, or 30 years. The rates are locked in within the term, but they will likely increase if you come to the end of the term and need to renew your policy or find a new insurer. Nonetheless, term life is usually the cheapest way to buy coverage during a specified time period.

Seven Specific Varieties of Term Life Insurance

Broken down into more specific categories, there are at least 7 kinds of term life insurance to consider. Here they are:

1. Annual Renewable: The annual renewable variety really has no major sub-classes, so we mention it again. With this type of policy, your premiums will go up each year as you age, but you are guaranteed to right to renew the policy.
2. Guaranteed Level Term: This is the basic multi-year term life package without the more customized features of the next five policies listed below. This is what most people think of when they hear “term life.” It varies whether or not the policy is guaranteed renewable.
3. Family Income Benefit: This variation allows you to choose to have benefits paid out in one payment or incrementally over a period of years. The idea is to allow you to prevent beneficiaries from spending up the whole amount rapidly.
4. Return of Premium: This policy-type lets you recover your premium payments at term’s end, should you not have already passed away. These policies tend to have longer terms. Their price point generally lies between “ordinary” term life and whole life.
5. Convertible Term Life: With a convertible policy, you can switch over to a whole life policy at the expiration of your term. You might opt for this if you want a cheaper policy initially but ultimately want the lifelong coverage of whole life.
6. Decreasing Term: Also called “mortgage term life,” this innovative policy arranges for your coverage to decrease as you pay down your mortgage. The idea is to make sure the mortgage can be paid off when you die or before. The premium remains constant, but it is not typically very high.
7. Increasing Term: If you can only afford a little life insurance now but want to ensure you can add more coverage later without reapplying, this is the policy for you. It allows you to get a start on insurance in tough times but easily expand when in a better position financially.

Making Your Term Life Decision

There are certainly additional possible variations on a term life policy than those listed above, but these are the major types you will encounter. Be sure to consult with an experienced insurance broker or agent before making a long-term decision that will be hard to change later on.