Life Insurance and Its Different Types
Life insurance is an agreement made between the policy-holder and the insurer. The privileges are provided by the insurance company and these are made upon the policy-holder’s death. Policy-holder who is entitled to receive the advantage should pay for the life insurance premium.Life insurance can provide financial protection to the policy-holder’s beneficiary or beneficiaries upon the occurrence of death to the insured. The recognized beneficiary is entitled to the proceeds of the life insurance coverage. The named beneficiary has the privileges during the time of the insured’s death.
Aside from the death of the insured, the occurrence of disability to the insured could also be a factor for receiving benefits from the life insurance. There could also be some benefits that the insured can be entitled of from the life insurance even if he still alive. This relies on the type of life insurance that he policy holder buys.
Life insurance policies are legal binding agreement between the insured and insurer although there could be times when three parties are involved like when the policy owner and the insured are different. Normally, insured and policy-owner are the same. However, an instance may exist when a person has become insured when a spouse, family or relative of him has bought a policy from the insurer. That makes the first person as insured, the one related to him as the policy holder and the insurance company as the insurer.
The contract of life insurance has terms that specify the coverage and the limitations of the events that are regarded as insured. Exclusions are specified to limit the obligation of the insurer. The events of a person that may usually be covered are death by nature and accidental death. However, there are events that bring death to an insured person that could not be entitled to benefits. Suicide and death from war, civil commotion and fraud are events that may bring no benefits to the insured and his beneficiaries.
Major categories are formed to provide options to the individuals for availing life insurance policies. Protection polices and investment polices are major categories of life-based contracts. The former is designed to give privileges to the individuals upon paying the life insurance coverage at its whole amount. The latter has an installment mode of payment that is normally through single or regular premiums.
Moreover, life insurance types are designed for different classes of market. Term insurance is a type of insurance in which the coverage is for a specific term as stipulated in the contract. The premium is also specified however, the contract does not have a cash value to be accumulated.
Whole life insurance has coverage with a face value and a level premium stipulated in the contract. Death benefits and cash values guaranteed to be paid out by the insurance company.
In universal life insurance, premiums are not based entirely on the insurance cost but also with interest rate offered. This type yields a higher interest than the whole life insurance yet it is less expensive than the latter. The policies of this life insurance type offer more investment choices to individuals.
Limited-pay, another life insurance type, has a coverage that limits the policy holder to pay for a specific period. Commonly, the duration for paying the annual premiums may take for ten years or twenty years depending on the coverage type availed. After the specified period, premium payment can be halted. The cash value can be received by the insured at the age of 65.
Getting life insurance quotes from different life insurance companies is a way to shop for the life insurance policy. In this method, you can compare the pros and cons as well as selecting for the life insurance type. You may choose for the type of life insurance as mentioned above or may call on for an insurance agent to help you choose for other types of life insurance policies.
