Term is the type of insurance that everybody understands. You pay a
premium, and the insurance company promises to pay a death benefit if you
die during the term in which the policy is in force. Normally, that term
lasts a year, but many term policies guarantee you the right to renew the
policy for the next year if you pay another premium.
"It's a bet just like one you'd lay down in Las Vegas," says Don
Reiser, president of Veritas Insurance Group in Houston. "You say, 'I
think I'm going to die this year.' The insurance company says, 'I'll bet
you're not.' "
Both sides place their bets, with the understanding that the "winner"
gets the spoils. (Since you can only win by dying, most people aren't too
disappointed to lose.)
How much does each side bet--and get--if it wins? As in Vegas, it
depends on the odds.
At an insurance company, the oddsmaker is called an actuary. The
actuary goes through a complicated mathematical analysis of mortality