Types Of Life Insurance

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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.

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