How many basic types of term insurance are identified?

Term insurance is typically categorized into three basic types: level term, decreasing term, and increasing term.

Level term insurance maintains a fixed death benefit and premium throughout the policy's duration, providing a predictable safety net for beneficiaries. This is the most common type and is widely used for those who seek stability and clarity in their financial planning.

Decreasing term insurance is designed such that the death benefit decreases over time, often in alignment with a financial obligation, such as a mortgage balance. This type serves to cover liabilities that diminish as time passes, making it potentially more affordable throughout its term.

Increasing term insurance, on the other hand, features a death benefit that increases over the duration of the policy. This type is useful for individuals seeking to keep pace with inflation or expecting an increase in personal financial obligations.

Recognizing these three types helps individuals understand the different ways term insurance can meet their needs, whether they require a stable amount of coverage, diminishing coverage for debts, or an increasing death benefit to match potential inflation impacts.