LIFE POLICY TYPES · 5 MIN READ

Term Life Designs: Level, Decreasing, and ART

Term life insurance provides pure death protection for a stated period with no cash value. The three core designs differ in how the death benefit and premium behave over time. Level term keeps both the face amount and the premium constant for a fixed level period (commonly 10, 15, 20, or 30 years); the insurer smooths the rising cost of mortality into one flat premium. Annually Renewable Term (ART) renews every year at the insured's attained age, so the premium starts lower than level term but climbs each year, eventually becoming far more expensive than level term at older ages. Decreasing term keeps the premium level while the death benefit declines on a predetermined schedule, most often tracking a mortgage amortization curve, which is why it is marketed as mortgage protection or mortgage redemption insurance. Two contract rights make term insurance flexible. Renewability lets the insured continue coverage at the end of a term without new evidence of insurability, at the higher attained-age premium, up to a maximum renewal age stated in the contract. Convertibility lets the insured exchange term coverage for permanent insurance without proving insurability, priced either at the attained age at conversion (higher premium, no back payment) or, less commonly, at the original issue age (requires paying the back premium difference). Some level term products also include a reentry provision: at the end of the level period the insured can requalify through new underwriting for a fresh low-rate schedule, but if health has deteriorated, the policy renews at much higher guaranteed rates. Return-of-premium term refunds all premiums if the insured survives the term. Because the refund is merely a return of the buyer's own money, it is generally received income tax free, but the premiums for ROP term are substantially higher than for plain level term. Credit life insurance is a specialized decreasing-term application sold through lenders on a group certificate basis to pay off a loan balance at the borrower's death.