Sometimes a very short time period. Premiums generally remain level or increase throughout the specified term. Policies do not build up cash value, so if the policy is surrendered, the policyholder does not receive any cash. These policies are designed to meet a specific need for a stated period of time. They are sometimes purchased to supplement permanent insurance.
Term is useful for people with limited income and high short term insurance needs.
Initial premium rates for term coverage may be lower than those for permanent insurance products because of the limited periods of protection and absence of cash value, but the premiums can escalate rapidly at each renewals, as the insured gets older or as the duration of time increases. This allows the policyholder to convert the term policy to a permanent insurance policy that builds up cash value. Generally, no additional underwriting is required to do such a conversion. Types of term coverage include. . . The death benefit and the premium payment remain fixed and level for a specified time period, most commonly 5 or 10 years.