Types Of Life Insurance

Life insurance is of two kinds- Term Life Insurance and whole life insurance. Whole life insurance is also known as permanent life insurance. It has many subcategories under its umbrella like the traditional whole life, universal life, variable and variable universal life, respectively.

According to 2003 data, around 6.4 million Term Life Insurance policies were purchased by individuals, whereas the number of whole life policies procured was 7.1 million. Affordable life insurance policies bought for individuals differs from life insurance purchased for groups. The below write-up focuses on individual life insurance policies.

Term Life Insurance

This is the simplest type of life insurance. Term insurance is paid out in the form of death benefit if the death takes place while the term is still in force. The term varies from one to 30 years. Other than the death claim, majority of the term policies do not offer any other benefits.

Level term and decreasing term are the two kinds of Term Life Insurance. Level term is the common form of Term Life Insurance. In Level term policies, the death benefit remains the same for the whole duration of the policy. According to 2003 data, 97% of the term insurance policies bought were level term.

Decreasing term insurance implies that over the period of the policy's term, the death benefit falls. And this occurs mostly in one-year increments.

Whole Life or Permanent Life Insurance

In permanent or whole life insurance, a death benefit is given out when you die. This means you will be entitled for a death benefit even if you die as late as 95. Traditional whole life, universal life, and variable universal life are the three main forms of whole life or permanent life insurance.

In traditional whole life type of insurance, the death benefit and the premium amount both remain the same over the course of policy. As the age of the insured increases, the price per $1000 benefit also rises. This means that the policy becomes very expensive by the time the insured turns 80 or more. The insurer can take an insurance premium which rises every year, but this would make it very difficult for the people to have a life insurance during old age. That is why, in the starting years, the premium is kept higher to cover the cost of the insurance.

If you go by the law, the excess payments should be accessible to the owner of the policy as cash value when it reaches a specified amount. This can be done when the policy holder is no longer interested in carrying on with the primary plan. Cash value is not an added benefit, but just an option.

Life insurance providers had come up with two modifications in the year 1970s and 1980s, on the traditional whole life insurance, universal life insurance and variable universal life insurance.

Whether you choose Term Life Insurance or whole life insurance, what matters is that you have an insurance coverage to take care of your family's financial needs when you are not around.