Types of Life Insurance Policies
Introduction Life insurance has almost become a basic necessity for everyone. Once you have decided to take a life insurance to ensure the safety and stability for your family in your absence, the next goal would be to decide the right kind of policy. Today, the market has numerous life insurance policies that will attract you to buy one of them. However, you need to make a good research about the available policies and decide the best for you. Only you know about your expenses and income and how much can you afford to pay for the premiums. Also, gathering information related to the benefits associated with the insurance plans and evaluating them according to your needs plays a vital role in making decision. Hence, before opting for any plan you must completely understand the working and benefits related to that particular life insurance plan. Let us learn some of the types of life insurance plan and their benefits to make you at ease while making decision.
Basically, there are two major types of life insurance policies, term life and permanent (cash value) life. Both the policies have their own benefits and loopholes. Some may feel that term life is better than the permanent life while others may have the opposite approach. You have to decide which plan offers you the best benefits by paying the amount which is affordable to you. Let us see more in detail about these two types of life insurance policies.
Term life insurance
Term life insurance provides death benefit only for specific period of time. As long as you pay the premiums, your life insurance policy remains active. If you die during the coverage period of our life insurance, your beneficiary would receive the death benefit (the face amount of the policy). However, if you live till the time term period, you will receive nothing. In such case, you need to renew your life insurance policy for a new period.
Term insurance is available for period between 1 year to 30 years or more. Once your pre-defined term is over, you can renew them without regard to your health, but at a higher rate. Your premium would be absorbed by the insurance company towards administrative expenses, company profit and a reserve account that pays claims to those who die during the term period. While purchasing the term life insurance, the premium amounts are inexpensive. However, as you grow the premium rate would rise. This is because the chances of your death increase with increase in your age. To cover this risk, the premium amounts rise at regular intervals. Most term insurance plan allows you the flexibility of switching your coverage to some kind of permanent insurance without answering health questions.
Permanent Insurance Policy
Unlike term insurance policy, permanent insurance policy provides you the protection for your entire life. However, you need to constantly pay the premiums at regular intervals to keep the policy active. Premium payments for permanent life insurance are usually greater than necessary to provide the life insurance benefit in the early years of the policy. The higher premiums are taken from you just to accumulate to make up the shortfall in premiums necessary to provide the insurance in the later years. The best thing about the permanent life insurance is that you get the entire money back, in case you discontinue the policy. There are different types of permanent life insurance such as whole life, universal life, variable life and so on. Every type has its unique features and advantages. By learning your capabilities of paying the premiums and your needs, you can select any one of these beneficial policies.
No matter which policy you choose for yourself, it is highly advisable to perform a market research about the type of the policy, related benefits and the reputation of the insurance company.
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