5:25 PM
zakri
Now the underlying cost of insurance shown in the above graph must be paid for all types of life insurance. But because one year term insurance isn’t a well liked product (due to the constant premium increases) the insurance companies smooth out these costs over periods of time or ‘terms’. Lets say they take the premiums in the above graph for a period of 5 years. Now rather than charging you the increasing premiums every year, instead they charge you the average premium over that 5 year term. You pay the same total costs, but now your premiums are level for 5 years. At the end of 5 years, your premiums increase and the company charges you the average premium over the next 5 year time period. The costs are the same, but now you’re premiums are level for 5 year increments. This type of insurance is called 5 year term.
If the company takes those underlying costs that increase every year and averages them out over 10 years (so your premiums are now level for 10 years), that is called 10 year term insurance.
And that’s term life insurance in a nutshell. Rather than paying the direct cost every year, your premiums are smoothed out or averaged over terms. 10 year term insurance, 20 year term insurance and 30 year term insurance are all common life insurance products in Canada today.
If the company takes those underlying costs that increase every year and averages them out over 10 years (so your premiums are now level for 10 years), that is called 10 year term insurance.
And that’s term life insurance in a nutshell. Rather than paying the direct cost every year, your premiums are smoothed out or averaged over terms. 10 year term insurance, 20 year term insurance and 30 year term insurance are all common life insurance products in Canada today.
Posted in: Term Life Insurance
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