What is a Guaranteed Annual Premium for a Term Life Insurance Policy?
Guaranteed premium life insurance simply means that the premium you pay on a regular basis for your insurance policy is guaranteed not to change from what was promised in the contract when you purchase the policy.
It is not the same as guaranteed Level premium, which means that the premium at issue will never increase. So, unlike guaranteed level premium, with guaranteed premium the premium may increase over time.
What Does Guaranteed Level Term Life Insurance Mean?
Guaranteed level term life insurance refers to the premium cost assigned to the life insurance policy for a specific period of time, usually up to 30 years for term insurance coverage.
For example, a term life policy may have guaranteed level premiums for a period of 5, 10, 15, 20, 25 or 30 years without increasing, regardless of your change in health or employment. The insurance company is assuming the risk and guarantees your premium to remain the same throughout the entire duration of your policy term.
"Guaranteed Premium" means that the price stays the same - it's "guaranteed".
This is typical in most whole life policies, but can be different in term life policies.
For example, you might purchase a straightforward 10-year term policy. In 99.9% of those policies, your premium payment is the same from first payment to the last payment.
However, with some term life policies, premiums will increase as you age, and pass through each "age band" (55-59, 60-64,65-69,70-74,75-79) until you reach your 80th birthday, and the policies end.
They will "Guarantee" your price through each band, but increase it in the next one, and "guarantee" that rate until the next.
Guaranteed premium life insurance is life insurance where the premium is guaranteed not to go up for a certain amount of time.
In Level Term Life, this is usually (but not always) the number of years in the term. When the term ends, the premiums usually jump up quite a bit.
"Guaranteed premium life insurance" is a life insurance policy in which you get a contractual guarantee that the premium will not change for a specific period of time. It will not increase, and it will not decrease during the period in which your premiums are guaranteed to remain level (the same).
Almost all life insurance plans provide premium guarantees. It’s really just a question of how long the guarantee will last.
Term insurance gives you guarantees for a specified amount of time.
The premium guarantee on term life could be for a duration of 10, 15, 20, 25, or 30 years.
Keep in mind, the longer you want the guaranteed level premiums to last, the higher the premium charged for coverage. You get what you pay for.
Quite simply guaranteed premium life insurance is life insurance where the premium is guaranteed to never go up for a certain period of time.
For example, level term life insurance is purchased for 10, 15, 20, 25 or 30 years of protection.
Be aware of this when purchasing term life because there is such a thing as annual renewable term coverage, where the premium goes up every year at renewal.
That’s one big reason why Level Term life insurance is the most popular type of term life policy, because it guarantees level premiums for the entire life of your Policy Term.
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