Term life insurance refers to life insurance that covers a specific period in your life. If the policy holder dies within the policy term, the beneficiaries will be rewarded with the death benefits.

Policy holder that died after the policy term has passed will not be eligible for the compensation. There are many types of term life insurance policies including annually renewable, guaranteed level, return of premium term life insurance policies.

Annually renewable life insurance will automatically renew every year as long as you pay the premium. The policy period ranges from 1 – 30 years. It is less expensive that the permanent insurance so it is suitable for people that have a tight budget. Unlike permanent policies, it does not offer cash value and build up equity. Depending on the company, your premium rate may be fixed or adjusted periodically. Some insurance company allows you to convert the annually renewable life insurance to a permanent insurance without undergoing a medical exam. However, you will be charged with a higher premium rate after you converted it to permanent insurance.

Guaranteed level term life insurance offers level premiums for a designated period. The period can last from five to thirty years. It is one of the most preferred policies among consumers because of its cheap price. Most companies will offer a guaranteed level premium. Fraud companies will not offer such guarantees so you should be avoid them. If the company does not offer a guarantee level premium, it may increase your rate. At the end of the policy term, you can choose to renew the policy but you will be charged with annual premium rate that will increase yearly.

Return of premium (ROP) life insurance offers a combination of the features in the guaranteed level insurance and life insurance. The difference between ROP insurance and other types of insurance is that the policy holder will be able to get back all the premiums at the end of the policy term. ROP life insurance is more expensive than non ROP life insurance. During the policy term, the insurance company will use your premium to invest in profitable projects and earn money. Therefore, they are able to return the full payment at the end of the policy term. There are several insurance companies that will give you the dividends or returns at the end of the policy. Most companies will just return the base premium you paid initially but not the returns of the investment.

In decreasing term policy, the level of coverage will reduce by each year. However, you are still required to pay for the same amount of premium every year. Just like other term life insurance policy, the coverage length will range from 1 - 30 years. Sometimes, the decreasing term policy is called mortgage life insurance. The theory of decreasing term policy is that a person will need lesser insurance as time goes by. People who don't hold other types of life insurance should not purchase decreasing term policy because it does not guarantee a level payout.