When you buy life insurance, your choice is between pricey cash value policies and less expensive term insurance. For most people, the best choice is term insurance, which is pure life insurance.
Assuming you decide to buy term insurance, you need to make some other choices. Some term insurance is “annual renewable term,” meaning that you buy your insurance one-year at a time. Each year, the price goes up. If your insurer hikes your premium too much, you can shop around for a better deal. (But you might not get a better deal if your health has deteriorated.)
Alternatively, you can buy “level-premium term” insurance, locking in the same term rate for five, 10, even 20 years. Such insurance will initially cost more than annual renewable term but you avoid the risk of sharp premium increases during that time frame. After the five or 10 or 20 years are up, if you want to maintain the term insurance, you’ll have to take another physical exam.
Thus, you run the risk of becoming uninsurable (or insurable only at high prices) due to a medical problem that has developed. However, this may be a risk worth taking if you think you won’t need much life insurance in 20 years.
