Temporary life insurance | What are they and what models are there?

Temporary life insurance

Within the different modalities offered by companies, term life insurance /temporary life insurance is one of the options chosen by young families due to its simplicity when hiring it. To understand a little better how it works, we explain its main features below.

The temporary life insurance covering the risk of death of the insured for a specified period of time. This term is usually estimated at one year and once it is finished, there is the option to renew it. The price of the insurance has an economic cost and is usually adjusted to the needs of the insured.

This type of insurance is dedicated to protecting family members or other types of beneficiaries so that they can assume financial obligations in the event that the insured dies suddenly.

Types of premiums in temporary life insurance

Depending on the renewal options and benefit amounts to be paid, the following types of term life insurance can be listed :

Increasing premium : as the insured age increases, the annual renewal of the insurance will vary according to the evolution of the death rate.
Level premium : the sum of the payment to the beneficiary is the same throughout the life of the policy, and the amount to be paid is the same within the fractioned payments (monthly, quarterly or semi-annual, with an interest rate). Thus, in the first years a premium is paid higher than that corresponding to age and then it will decrease, remaining level.
Decreasing premium : the amount of what the insurance will cover will be reduced in a decreasing way during the period of protection time. It is a very common policy when it comes to being mortgaged, linking the duration of the insurance to that of the mortgage. The price of the premium to be paid by the insured remains constant throughout the contract.

Advantages of temporary life insurance

Compared to other types of policies, term life insurance is not intended to generate investments or savings . It is a contract aimed at obtaining the greatest protection of money in the most economical way. The main advantage is its low price , designed to obtain the maximum benefit.

When it comes to relying on life insurance, starting out by hiring one with the temporary modality can be a wise choice in the medium term. As family income increases, you can consider changing the policy for another with better conditions and with a higher premium payment.

Insurance Renewal or Conversion

Term life insurance, also known as term, has the possibility to choose how to extend it. In general, most policies have an automatic renewal and involve an increase in the premium.

Another way to continue insurance is to convert to permanent life insurance. Both options, both the renewal and the conversion of life insurance, do not take into account the health of the insured.

These are two options that offer a formula of financial protection for a specific and limited time. The beneficiary will receive a certain amount of money in the event of the death of the insured during the term of the policy.