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erm life policies provide coverage for specific periods of time, sometimes as little as one year. While you usually can renew term life policies for one or more terms even if your health has changed, there’s potentially a big risk here if you get sick during the term.

* Tip. If your health does change, you probably won’t be able to buy another term without seeing your premium skyrocket. You should ask your insurer or agent what the premium will be if you continue to renew the policy.

* Note. You should also ask whether you will lose the right to renew the policy when you reach a certain age. Because this coverage is fairly cheap, it’s often a good option for young people in good health who can’t afford to buy a cash value life policy.

Two common features you may find, and should look for in term life policies:

* Ability to Convert -- If this feature is offered by the company you are looking at, it means that you can exchange the policy for permanent life insurance of equal (or sometimes lesser) value without having to requalify medically. Converting a policy will cause your premium to increase because cash value coverage typically costs more than term life. Convertibility can be an important feature if your health declines and you become unable to qualify for a permanent policy through a separate application. Converting to a cash value policy can also allow you to begin using your policy to build savings. Insurers typically only allow policyholders to convert term life policies before age 65.

* Renewability -- With this feature, you can extend the policy for additional terms, regardless of your health and without having to pass a medical exam. This can be another advantage of term life coverage as you age or if you become ill. Even if you no longer meet an insurer’s underwriting criteria, the company still must renew. Terms can renew every one, five, 10, or 20 years. Premiums generally increase at each renewal term. Annually renewable premiums can be extremely high for policyholders past middle age. If you’re paying high annually renewable premiums, you may want to convert to some other type of coverage.

Term life insurance typically comes in one of three common policy variations:

1. Level term coverage pays a death benefit that remains constant over the term. For example, a 20-year level term policy with a $100,000 death benefit will always pay $100,000, whether the insured dies in the fifth or 15th year. Depending on the policy, your premium for level term coverage will either remain constant or increase at a scheduled rate.
2. Decreasing term coverage pays a death benefit that decreases over the term at a scheduled rate. For example, a 20-year decreasing term policy may begin with a $100,000 death benefit that decreases by $5,000 per year. If you die in the 11th year, the policy pays $50,000. Decreasing term coverage can be a good option for parents since a child’s need for financial support typically decreases as they near adulthood. A disadvantage of decreasing term coverage is that its convertibility value also decreases each year. Premiums typically remain constant over the term.
3. Increasing term coverage pays a death benefit that increases over the term at a scheduled rate, which is often linked to inflation. For example, a 20-year increasing term policy may begin with a $100,000 death benefit that increases by 5 percent of the face value per year. If you die in the 12th year, the policy would pay about $155,000. Premiums typically increase each year relative to the benefit increase.

Look for us to continue this next week with our Brand New Circle of Safety Series: "What You Need to Know about Cash Value Life Insurance..."