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CHAPTER 11

Another popular use for decreasing term is with families with young children. The policy would ensure a sufficient level of income while the children are growing up. As the children grow older, the need for as much coverage decreases until the youngest child has moved out and is on his or her own.

Renewability and Convertibility Provisions When a someone takes out an insurance policy, that person generally has to answer questions about his or her health and hobbies to make sure that the insurance companies see them as a suitable risk. Many times, the prospective insured must even have a physical, but this usually depends on how much coverage that person is requesting. Most term policies are renewable for successive terms without the insured having to show proof of insurability again, although the amount of successive renewable terms may be limited. If you decide to purchase term insurance, be sure your policy has a guaranteed renewable provision, which is usually provided at no cost by the insurer. This will protect your ability to renew your policy should you become uninsurable due to an illness or accident. Never buy a policy that doesn’t have a renewability option.

Term policies may also have the ability to be converted into whole life or other types of permanent policies for the same, or lesser, amount of coverage. Again, the insured wouldn’t have to prove that he or she is insurable since that person already had a term policy. Insurance com- panies usually protect themselves by establishing a maximum age, at which time the insured would no longer be able to convert. The biggest advantage to converting your policy is that you would then have pro- tection for the rest of your life as long as you continue to pay your pre- miums. This option is standard in most term policies.

PROS AND CONS TO TERM INSURANCE

Term insurance offers an inexpensive way to purchase large amounts of coverage for a specified (albeit relatively short) amount of time. When you add in the fact that you can renew the coverage, as well as convert the policy to a form of permanent insurance, you have three very good

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