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Types Of Life
Insurance
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There are two major types of life
insurance:
1. Term Life - is the simplest form of life insurance.
It pays only if
death occurs during the term of the policy, which is usually from one
to thirty years. Most
term life insurance policies have no other benefit provisions.
There are
also two basic types of term life
insurance policies:
Level Term
(when the death benefit stays
the same throughout the duration of the policy) and
Decreasing
term (when the
death benefit drops, usually in one-year increments, over the course of
the policy’s term).
2. Whole Life or
Permanent Life Insurance - is
the type of permanent insurance that pays a death benefit whenever the
policyholder dies.
There are
three major types of whole life or permanent life
insurance with the
variations within each type:
Traditional Whole Life - With
this policy both the death benefit and the
premium are designed to stay the same (level) throughout the life of
the
policy. In this case the insurance company
keeps the premium level at the same level by charging a premium that,
in the early years, is higher
than what is needed to pay claims, and by investing that money, they
are using it to
supplement the level premium to help pay the cost of life insurance for
older people when their premium gets high if the insured lives longer.
By law, when these “overpayments” reach a certain amount, they must be
available to the policyholder as a cash value if he or she decides not
to
continue with the original plan. The cash value to the policyholder is
an alternative, not an additional,
benefit under the policy.
Universal Life or
Adjustable Life
- This type of policy allows more flexibility
than traditional whole life policies. Its cash value account
generally earns a money market rate of interest. After money has
accumulated in the
account, the policyholder will also have the option of altering premium
payments (providing there is enough money in the account to cover the
costs).
Variable Life - This type of life policies combine
death protection with a savings account
that can be invested in stocks, bonds and money market mutual funds.
The value of
the policy usually grow more quickly, but involves much higher risk. If
investments do not
perform well, the cash value and death benefit may decrease. Some
policies, however,
guarantee that the death benefit will not fall below a minimum level.
Universal Variable Life - Some insurance companies offer also
this
variant of policy, which combines the features of variable and
universal life
policies. It has the investment risks and rewards characteristic of
variable life insurance,
combined with the ability to adjust premiums and death benefits that is
characteristic of universal life insurance.
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RELATED LINKS:
Life Insurance
Insurance Articles
Life Insurance: Invest In
Mortgage Protection
How To Control Your
Life Insurance Premiums |
ABOUT
THE AUTHOR
If
you are under immpression that you are paying too much for insurance,
you may be right. For more information
about insurance visit: AllQuoteInfo.com
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