Types of Life Insurance

Published on: Feb 25 2011 by Zaheer

Life insurance is a kind of contract between two parties, i.e. between policy owner and the insurer wherein the insurer consents to pay the indicated beneficiary a sum of amount on the event of the insured individual’s death, terminal illness or critical illness. The policy owner in return agrees to pay stipulated amount of money in lump sums or at regular intervals.

Everyone who has a family to support is worried about the financial security of his family after his death. Certainly, it is hard for anyone to plan for financial aspects after one’s life. Often people ignore the importance of having life insurance coverage because they are not aware of the importance of it. In an event of one’s death, the family usually faces a lot of financial problems without having any coverage.

Before taking any policy, it is extremely important to have a thorough knowledge of the different types of policies and out of them choose the best that suits your requirements. For those who are keen to purchase the life insurance plan but don’t know much about different plans this article will definitely be a great help. Following are given some of the different types of life insurance plans:

Term Insurance Policy

Term insurance policy is a type of life insurance which most of the people imagine of. It is perhaps the best policy that fulfills the needs of the purchaser. Term Insurance Policy is a kind of limited coverage that provides coverage for restricted number of years. In this kind of plan the policy owner pays unvarying premium for said number of years depending on the coverage.

Whole Life Policy

Whole life policy is a type of life insurance which is known to be the most costly among the three principal types, i.e. term, whole and universal life insurance. Although, it is costlier, it guarantees death benefits along with a cash value growth rate, and fixed premium. Because of its guaranteed death benefit, it is often appreciated by the people and also it has a minimum risk of lapse. To avoid policy lapsing, the policy owner is required to make regular unvarying payments like term insurance policy.

Universal Life Insurance

Universal life insurance is third of the principal types of life insurance. It is a permanent life insurance which is much more resilient for policy holders, however, requires much more attention to prevent any lapsing. This policy is costly than the term insurance policy but economical than whole life policy. Universal life insurance doesn’t follow any set schedule for payments nor is the growth of cash value fixed. The policy holder must take an account of the amount of cash value saved up to avoid any policy lapsing. If anyone is interested in this sort of policy, one has to understand the conditions well, as this policy is funded slightly different than other available polices.

Endowment Policy

Endowment policy is another type of life insurance which is quite appreciated among the masses. It is a policy that integrates the risk coverage with those of savings and investment. This means that the policy holder will receive the assured amount if he/she dies while the policy time is yet not over. Similarly, if the policy holder survives, still he will get assured amount. The insurance company is legally bound to pay the additional benefits such as bonus, double endowment, marriage or education endowment or any other benefits that are offered by the insurer in addition to the assured amount to the policy holder if he survives subsequent to the end of the policy period. In this type of policy, the policy holder can expect to get huge amount at the end of the policy tenure.

Special Life Insurance

Apart from the above mentioned types of life insurance, there are some other types of life insurance as well which are given below:

Special Purpose Life Insurance

Special purpose life insurance is a life insurance that assists the policy holder in some sort of purpose like paying off a mortgage if the policy holder dies.

Business Life Insurance

Life insurance is not just to assist the families in case of any unwanted event like death of the policy holder but also provides help to the business to prevent any financial crisis because of the death of any valued member. Business life insurance is a policy that is often used for the sake of rewarding employees.

Special Risk Life Insurance

Insurance companies are often hesitant to provide insurance to the people who are known to stand for an above average risk which an insurance company in no way willing to cover at standard rates. However, these people can still buy the coverage under different life insurance products.

Money Back Policy

Money back policy is a policy that assists his policy holder in the time of his needs. The need can be anything like marriage, education, and so on. Money back policy provides the money back to the policy holder after the specified duration. The family of the deceased gets the amount if the policy holder dies before the end of the policy tenure.


Leave a Reply

*

*