The general principle of life insurance is an agreement between an individual who purchases a life insurance deal and the insurance company he purchased it from. This bond benefits both parties, as both get paid but in different ways. The insurer gains by the premiums paid gaining a profit as the years go on, and the individual benefits in retrospect, as his partner and children will be compensated when the unfortunate happens.
As with any insurance policy, life insurance takes a substantial amount of time to mature. Once matured, the face value of the policy is specified. A policy matures upon the death of the insured, or when the insured reaches a certain age. Depending on the policy, the insured can make differing amounts of payments over time. As with most insurances, failed payments may result in the termination of the insurance except for Universal Life Insurance.
There are many types of life insurance an individual can buy, and the type best suitable depends on various alternating factors such as critical illness, accidental death, temporary, permanent or even if he has the mortgage tied in with the policy. Various types of policies are as follows;
Temporary (Term) Life Insurance;
Being the least expensive, it is also the simplest. Temporary life insurance policies are fixed over an extended period of time (usually 1-10 years) and don’t amass a cash value. This form of life insurance pays an unchanging amount to your spouse in the event of your death. Simple in the fact that the premiums are paid and the beneficiaries are looked after.
Whole Life Insurance;
This insurance provides cash value over time with a tax-deferred basis, and some insurance companies may even pay the policyholder a dividend. This type of life insurance would be highly recommended by many due to the cash value that is available for you or your family before you pass away. It helps with many life aspects such as providing for your children’s school education, or for your retirement funds. This type of life insurance is more situated for protection of your family’s interests.
Variable Life Insurance;
Variable life insurance is for individuals who like their life insurance policy to act simultaneously to the financial market. The policyholder, not the insurer, decides how the money is invested and the cash value, if done right, can gain at a much more rapid rate in comparison to other plans. The disadvantage of this plan is that if the financial market is in poor economic state, then so will be your life policy. Similar to whole life and universal life insurance, you may withdraw against the cash value.
Universal Life Insurance; This type of life insurance is a flexible plan. These policies increase interest and allow the owner to adjust the death benefits and premiums to their current life circumstances. You decide the amount to be paid as a premium for this type of insurance, and if you miss out a payment, this will be taken away from your death benefit. Universal life insurance stays in consequence as long as your cash value can cover the costs of the policy.
The fundamental types of life insurance as stated above suit different individuals in different ways depending on what they want to get out of their life insurance. Now Life Insurance can get a lot more complicated when digging deep, such as including riders and add-ons for extra benefit, but below summarises the basics.
So, who needs Life Insurance?
That Question is probably the most simple you will ever have to answer. Depending on the status of your loved beneficiaries, I think most people will necessitate life insurance for the sole purpose of helping your family escape financial difficulty and for your own peace of mind. Helping;
1-Children that are depending on you
2-You are married
3-Parent or relative who is depending on you
4-Your pension isn’t enough for your family
5- You ant to care for a loved one
Hope this simple guide helps with the general basics of life insurance cover and the various types.
by Peter Goligher Goligher
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Tags: accidental death, certain age, critical illness, face value, insurance companies, insurance company, insurance deal, insurance policy, insurances, insurer, life aspects, Life Insurance, life insurance policies, policyholder, retirement funds, retrospect, school education, temporary life, term life insurance, universal life insurance, whole life insurance
1 Response
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Posted on March 1st, 2009 at 20:21
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