One advantage that guaranteed level premium term life insurance has over yearly renewable term life insurance is that your premiums remain level (fixed for a period of time). The price you pay will never go up or down during this period. Premium is based on your age at the time you purchase the policy and it does not change during the guaranteed level premium period. It functions exactly as we described above, and can cover you until you reach 85 years of age. Keep in mind after the guaranteed level premium period that you choose ends, the premium will go up until age 85 when the policy ends.
With yearly renewable term life insurance your policy renews every year. Each year, the premium you pay will be calculated based on your current age. It is very inexpensive in the early years, then increases as you get older. The plan will automatically renew every year until you reach the age of 90 and you will not be required to have a paramedic exam or provide proof of insurability each year. The term life insurance premium may increase annually. If you need coverage from age 75 to 90, you are able to continue the plan with a fixed premium rate, but your coverage amount will decrease annually.
Another important benefit is your ability to convert your yearly renewable term life insurance policy or level premium term insurance policy to a SBLI whole life insurance policy, or to a conversion universal life (UL) policy, without having a paramedic exam, or providing additional proof of insurability. Your coverage amount will be for a face value amount of not more than the face value amount of your term life insurance policy on the date that you converted the policy. Other details, such as when you can convert, vary by policy series and are expressed in your contract.
If you need term life insurance to cover you for an extended period of time (rather than just a few years), it may be financially beneficial to choose a guaranteed level premium term life insurance policy over a yearly renewable term life insurance policy. A licensed representative from SBLI can discuss the different options with you, to help you decide the type of term life insurance that is appropriate for you.