Types Of Life Insurance

Life Insurance is a form of life risk management or life cover that helps guard against the risk of a contingent loss of individual’s life. In general terms Insurance can be defined as the equitable transfer of the risk of a loss of Life and critical illness cover, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss.


Having a life insurance policy makes the insurance company agree to pay a sum of money upon the occurrence of the insured individual's death or other event, such as terminal illness or critical illness. Every life insurance policy matures when the insured individual dies or reaches a specified age like 100 years.Life insurance may be divided into two basic categories - temporary life insurance and permanent life insurance which may be further broken into subclasses as term, universal, whole life and endowment life insurance.


Temporary life insurance:This type of life insurance provides for life insurance coverage for a specified term of years where the premium buys protection in the event of death and nothing else. A policy holder insures his life for a specified term only. If he dies before that specified term is up, his estate or beneficiary receives a payout. If he does not die before the term is up, he receives nothing. Permanent life insurance:The type of life insurance in which the policy remains active until it matures unless the owner fails to pay the premium when due is called permanent life insurance.


This type of life insurance is further divided into four main types:Whole life coverage: The whole life coverage ensures guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges that will not reduce the cash value shown in the policy in any way.Universal life coverage: Universal life coverage provides permanent insurance coverage with greater flexibility and ease in premium payment and the potential for a higher internal rate of return.Limited-pay: In such an insurance policy the premium pay periods commonly include 10-year, 20-year, and paid-up at age 65.


All premiums are paid over a specified period after which no additional premiums are due to keep the policy in active.Endowments: Endowment Insurance is paid out after a specific period in either the conditions whether the insured lives or dies, In this policy, the policy cash value equals the equals the death benefit at certain age. In terms of annul premium, endowments are considered as expensive as compared to the other types of life insurance as the premium paying period is shortened.