For a given age and face value, term insurance when first issued usually has the lowest premium of the types of life insurance. If the level of coverage remains constant and the insurance goes through several renewals, the premium cost will increase until it is greater than the premium for other types of insurance. Term life insurance usually ends when the insured attains a specified age. For younger persons and families, term insurance is a relatively inexpensive way to create an estate and provide reasonable security for survivors in the event of the untimely death of the insured. The cost advantage is lost as time passes.
Premium payments continue until the insured dies and the death benefit is received by beneficiaries.
In the level premium form, the premium is unchanged during the insured's life. During the initial years, the premium is greater than the amount required to fund the actuarial risk. Part or all of the excess accumulates as a reserve cash value that can be withdrawn if the policy is surrendered, or can be used for other purposes identified in the policy. Depending on the policy provisions, the cash value at the time of death of the insured may be, or may not be, paid to the policy beneficiary with the death benefit. In the flexible premium form, the premium periodically is adjusted for changes in the return on insurance company investments and for mortality rate changes.