Monday, 10 January 2011

Types of Life Insurance Policies

Life insurance policies give financial protection to the dependents against the unfortunate death of the insured. A person who has consideration about his or her family must join any good life insurance policy to secure his or her family. Here let us see the types of Life insurance policies. Basically there are three types of life insurance policies. They are Whole life insurance policies, Term life insurance policies and Universal life insurance policies. Let me share a brief explanation about them.

Whole insurance policy

Whole life insurance policies are also known as permanent policies which gives a permanent protection of the insured. There is no expiry term of this insurance. It gives you life cover as long as you paid annual premium which is a fixed amount. Some insurance companies does not allow fixed premium for life time. In that case the premium amount may vary after several years as per the agreement. The main advantage of this policy is it gives a guaranteed coverage for a lifetime. Some insurance companies invest a part of this policy amount in cash value investments. Even if the money which you deposited through this policy will grow, most of the financial experts do not see it as a saving plan. This policy can be closed by the policy holder or can take loan against the policy. Some insurance firms give a certain amount after a stipulated age such as 80 years etc., and the coverage will continue.

Term life insurance policy

Term life insurance policy gives life cover for a limited period with a fixed premium and after the expiry of the term the policy will not give any coverage and the insured person may take another policy with another time period and premium. If the insured person is expired within the term of the insurance the sum assured or death benefit will be paid to the nominee. The premium of this type insurance is comparatively low when compared to other type of insurance policies and this is the cheapest way of insuring life and protect the financial future of the dependents when any unfortunate death of the insurer occurred. This is pure form of life insurance (also the best one) and does not give growth of the money deposited. It assures the sum assured at the event of death of the insured and after the term ends, if the insured is alive, he or she would get the total (premium) amount deposited and a percentage as interest or addition as per the terms of the policy.

Universal life insurance policy

Universal life insurance policy is a type of life insurance which has a permanent nature and also has an investment nature. The excess amount of premium after the cost of insurance is invested in financial instruments and the insured will get the growth of his or her money along with the sum assured. But as per the market condition the growth of money is not guaranteed. This insurance policy is predetermined about the investment of the amount after the cost of insurance protection in stocks, mutual funds or bond.

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