Types of term life insurance: level, decreasing, renewable, convertible, return-of-premium and group term

Policies all called term life insurance can differ completely in sum assured, premium and what happens at expiry. The most practical way to tell the types apart is to look at three things: how the sum assured changes over time, whether the policy can be renewed or converted at expiry, and who buys and pays for it. MoneySense (MAS) summarises term insurance as cover for a fixed period only, with terms generally ranging from 5 to 40 years, a sum assured that can be fixed or decrease each year, and products that may carry renewable or convertible features (updated 28 Sep 2026). This article takes each of the three dimensions in turn and explains what each type solves and what it costs.

Four dimensions to separate first

The table below puts the common classifications side by side. A single policy is usually a combination of several dimensions, for example "level + convertible" or "decreasing + non-renewable".

Level term and decreasing term: two paths for the sum assured

Under level term, the sum assured stays the same for the whole term. MoneySense notes that term premiums stay constant during the term and are recalculated only on renewal, conversion or reinstatement. Under decreasing term, the sum assured falls each year and reaches zero at the end of the term; its typical use is to match a mortgage balance that reduces year by year.

Using decreasing term for a mortgage does not mean decreasing term is the only option: a level term policy whose term matches the loan tenure covers the same liability. The difference is that the sum assured does not fall with the balance, so for the same starting sum assured the average level of cover is higher and the premium is usually higher too. How to weigh the two is covered in Mortgage and loan cover.

Renewable term: what is guaranteed is the right to buy again

Renewable term runs in blocks of 5 or 10 years, and at the end of each block the policy can be renewed without fresh evidence of health. What is guaranteed is the right to renew, not the price: MoneySense cautions that the premium on renewal is often not guaranteed and is revised according to age at renewal. LIA's DPI guidelines take the same line: for a 5-year renewable term DPI, the renewal premium may rise because of age, but medical conditions discovered during the period of cover remain covered after renewal (29 Jun 2018).

Renewal carries two main costs. First, the premium rises with attained age at each renewal, and the level of premiums in the later blocks is unknown at the time of purchase. Second, renewal is subject to a maximum age. For example, some product pages state that the automatic renewal feature applies only to 5-year and 10-year terms and that the renewal premium is based on the attained age and the rates applicable at the time (product page, as at 22 Apr 2026). The actual maximum renewal age and premium arrangements are set out in each product summary. The difference between the renewal and conversion options is covered in Convertible and renewable options.

Convertible term and the Guaranteed Insurability Option

Convertible term carries an option to convert all or part of the sum assured, before an agreed age and without fresh underwriting, into a policy with cash value such as whole life or an endowment plan. A Guaranteed Insurability Option (GIO) allows the sum assured to be increased without evidence of health after specified life events such as marriage, the birth of a child or the purchase of a home.

The conditions of both options vary by product. For example, the product page of one non-participating level term plan states that the conversion option can be exercised only once, in full or in part, no later than the policy anniversary on which the life assured is aged 70 next birthday, and that the new basic sum assured may not exceed the original basic sum assured (product page, information as at 17 Aug 2026). These conditions only illustrate the form such limits take and do not represent the rules of other products. A full checklist of age limits, number of exercises, sum assured caps and conversion targets is in Convertible and renewable options.

Return-of-premium, increasing and other variants

Return-of-premium term refunds all or part of the premiums paid if the policy reaches expiry without a claim. The refund is not an investment return: the insurer has to set aside funds for the payout at expiry, so the premium is usually higher than that of pure protection term with the same sum assured and term; MoneySense's comparison likewise puts term premiums below those of products bundled with a savings element. Whether all premiums are refunded, whether the refund carries interest, and what happens on early surrender or lapse differ widely and are governed by the policy terms; it should not be assumed that premiums paid can be recovered.

Increasing term raises the sum assured each year by a fixed percentage or an index, to offset inflation or income growth, with a correspondingly higher premium. Not every insurer offers these two variants; availability and conditions are set out in each product summary.

Group term, CPF DPS and Direct Purchase Insurance (DPI)

Three kinds of term cover are not simply a matter of picking a policy yourself; they differ in how they are held, how long they last and what limits apply.

Group cover, DPS and individual policies can be stacked, but their sums assured are not netted off automatically. When sizing cover, treat each as an available resource and deduct it item by item; see How much sum assured you need. The full DPS rules are in CPF Dependants' Protection Scheme.

Choosing a structure by the shape of the liability

The structure should be worked out backwards from the shape of the liability to be covered, not forwards from a product name. The table below deals only with how liabilities map to structures and is not a recommendation of any product.

Suitability depends on personal debt, income, health and existing cover. For an interpretation that takes your own circumstances into account, you can register your needs through the contact details on this site.