Rates depend on age, physical condition, family medical history, occupation and dangerous personal hobbies. Annual renewable term will increase each year as long as the policy is in force. Policies do not build up cash value, so if the policy is surrendered, the policyholder does not receive any cash. Term policies are designed to meet a specific need for a stated period of time. They are sometimes purchased to supplement permanent insurance.
Term insurance 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 the term 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. This allows the policyholder to convert the term policy to a permanent insurance policy that builds up cash value.