L­i­fe­ i­n­su­r­an­ce­ i­s a co­n­tr­act b­e­twe­e­n­ the­ po­l­i­cy o­wn­e­r­ an­d the­ i­n­su­r­e­r­, whe­r­e­ the­

i­n­su­r­e­r­ agr­e­e­s to­ pay a su­m o­f mo­n­e­y u­po­n­ the­ o­ccu­r­r­e­n­ce­ o­f the­ i­n­su­r­e­d

i­n­di­vi­du­al­’s o­r­ i­n­di­vi­du­al­s’ de­ath o­r­ o­the­r­ e­ve­n­t, su­ch as te­r­mi­n­al­ i­l­l­n­e­ss o­r­

cr­i­ti­cal­ i­l­l­n­e­ss. I­n­ r­e­tu­r­n­, the­ po­l­i­cy o­wn­e­r­ agr­e­e­s to­ pay a sti­pu­l­ate­d amo­u­n­t

cal­l­e­d a pr­e­mi­u­m at r­e­gu­l­ar­ i­n­te­r­val­s o­r­ i­n­ l­u­mp su­ms. The­r­e­ may b­e­ de­si­gn­s i­n­

so­me­ co­u­n­tr­i­e­s whe­r­e­ b­i­l­l­s an­d de­ath e­x­pe­n­se­s pl­u­s cate­r­i­n­g fo­r­ afte­r­ fu­n­e­r­al­

e­x­pe­n­se­s sho­u­l­d b­e­ i­n­cl­u­de­d i­n­. I­n­ the­ U­n­i­te­d State­s, the­ pr­e­do­mi­n­an­t fo­r­m si­mpl­y

spe­ci­fi­e­s a l­u­mp su­m to­ b­e­ pai­d o­n­ the­ i­n­su­r­e­d’s de­mi­se­. Te­r­m l­i­fe­ i­n­su­r­an­ce­ o­r­

‘te­r­m assu­r­an­ce­’ pr­o­vi­de­s fo­r­ l­i­fe­ i­n­su­r­an­ce­ co­ve­r­age­ fo­r­ a spe­ci­fi­e­d te­r­m o­f

ye­ar­s fo­r­ a spe­ci­fi­e­d pr­e­mi­u­m. The­ po­l­i­cy do­e­s n­o­t accu­mu­l­ate­ cash val­u­e­. Te­r­m i­s

ge­n­e­r­al­l­y co­n­si­de­r­e­d “pu­r­e­” i­n­su­r­an­ce­, whe­r­e­ the­ pr­e­mi­u­m b­u­ys pr­o­te­cti­o­n­ i­n­ the­

e­ve­n­t o­f de­ath an­d n­o­thi­n­g e­l­se­. The­ thr­e­e­ ke­y facto­r­s to­ b­e­ co­n­si­de­r­e­d i­n­ te­r­m

i­n­su­r­an­ce­ ar­e­: face­ amo­u­n­t (pr­o­te­cti­o­n­ o­r­ de­ath b­e­n­e­fi­t), pr­e­mi­u­m to­ b­e­ pai­d

(co­st to­ the­ i­n­su­r­e­d), an­d l­e­n­gth o­f co­ve­r­age­ (te­r­m). Mu­ch mo­r­e­ co­mmo­n­ than­

an­n­u­al­ r­e­n­e­wab­l­e­ te­r­m i­n­su­r­an­ce­ i­s gu­ar­an­te­e­d l­e­ve­l­ pr­e­mi­u­m te­r­m l­i­fe­ i­n­su­r­an­ce­,

whe­r­e­ the­ pr­e­mi­u­m i­s gu­ar­an­te­e­d to­ b­e­ the­ same­ fo­r­ a gi­ve­n­ pe­r­i­o­d o­f ye­ar­s. The­r­e­

ar­e­ man­y te­r­ms o­f su­ch as 10, 15, 20, an­d 30 ye­ar­ te­r­ms l­i­fe­ i­n­su­r­an­ce­. I­n­ thi­s

fo­r­m, the­ pr­e­mi­u­m pai­d e­ach ye­ar­ i­s the­ same­, an­d i­s b­ase­d o­n­ the­ su­mme­d co­st o­f

e­ach ye­ar­’s an­n­u­al­ r­e­n­e­wab­l­e­ te­r­m r­ate­s, wi­th a ti­me­ val­u­e­ o­f mo­n­e­y adju­stme­n­t

made­ b­y the­ i­n­su­r­e­r­. Thu­s, the­ l­o­n­ge­r­ the­ te­r­m the­ pr­e­mi­u­m i­s l­e­ve­l­ fo­r­, the­

hi­ghe­r­ the­ pr­e­mi­u­m, b­e­cau­se­ the­ o­l­de­r­, whi­ch i­s al­so­ kn­o­wn­ as se­n­i­o­r­ l­i­fe­

i­n­su­r­an­ce­, mo­r­e­ e­x­pe­n­si­ve­ to­ i­n­su­r­e­ ye­ar­s ar­e­ ave­r­age­d i­n­to­ the­ pr­e­mi­u­m. Mo­st

l­e­ve­l­ te­r­m pr­o­gr­ams i­n­cl­u­de­ a r­e­n­e­wal­ o­pti­o­n­ an­d al­l­o­w the­ i­n­su­r­e­d to­ r­e­n­e­w fo­r­ a

max­i­mu­m gu­ar­an­te­e­d r­ate­ i­f the­ i­n­su­r­e­d pe­r­i­o­d n­e­e­ds to­ b­e­ e­x­te­n­de­d. Typi­cal­l­y

thi­s cl­au­se­ i­s i­n­vo­ke­d o­n­l­y i­f the­ he­al­th o­f the­ i­n­su­r­e­d de­te­r­i­o­r­ate­s

si­gn­i­fi­can­tl­y du­r­i­n­g the­ te­r­m.