Term life insurance

I.C Term life

Term life is a core Types of Policies topic on the Texas Life producer exam (InsTX-Life01) outline in force on or after 1 September 2026. These unofficial notes start with the basic deal: the policy pays a death benefit only if the insured dies during the term. There is generally no cash value on a pure term contract. That keeps the initial premium lower than permanent insurance for the same face amount, especially at younger ages. The tradeoff is that coverage ends, or the price jumps, when the term is over. The outline splits the topic into types and special features.

I.C.1 Types

Level term keeps a level death benefit for a stated period such as 10, 20, or 30 years. The premium is often level for that period as well. At expiry the owner may be able to renew, convert, or drop the coverage. A 20-year level term on a 40-year-old is a common income-replacement design: it matches a working horizon without funding a lifetime reserve.

Decreasing term reduces the death benefit over time, usually on a schedule that tracks a mortgage or other amortizing debt. Premiums are often level even while the face amount falls, which means the cost per thousand of remaining coverage rises. Credit life sold with a loan is a cousin of this idea. Decreasing term is a poor match if the need is a level income stream for dependents.

Return-of-premium term refunds some or all premiums if the insured outlives the term. The extra promise is paid for with a higher premium than comparable level term. If the insured dies during the term, the beneficiary receives the death benefit, not a pile of returned premiums plus the face unless the contract says otherwise. Treat the refund as a living benefit that only appears if the term is survived.

Annually renewable term (ART) is yearly term that can be renewed without new evidence of insurability. The death benefit stays level. The premium rises each year with attained age. Early years are cheap; later years become expensive. ART is the building block inside many group life plans and inside the cost-of-insurance charge on universal life.

I.C.2 Special features

Renewable term lets the owner continue coverage at the end of a term without proving good health. The new premium is based on attained age, not original age. Renewability protects someone who has become uninsurable. It does not freeze the price. A 20-year renewable term that renews at 60 will price like a 60-year-old, not like the original 40-year-old.

Convertible term lets the owner swap the term policy for a permanent policy without new evidence of insurability. Conversion is usually limited to a window and to a stated permanent form. The new premium is based on attained age at conversion, unless the contract offers an original-age method that requires a catch-up reserve payment. Conversion is the feature that keeps a term buyer from being locked out of permanent coverage after a health change.

When a fact pattern mentions a mortgage, look at decreasing term. When it mentions a cheap yearly rate that steps up, look at ART. When it mentions “premiums come back if you live,” look at return-of-premium. When it mentions keeping coverage after a diagnosis, look at renewability or convertibility. Term is simple on the surface and easy to mis-label if you skip the feature list.