All about life insurance policies

By: Emily Bronte

Life insurance refers to the insurance policies in which an insurance policy holder and an insurance company enter into a contract in which the latter promises to deliver a specific beneficiary amount of money upon the death of the former. In this era of great uncertainty, most of the people resort to life insurance policies to secure their lives. Such policies grant security to the dependents of the policy holder after your demise. There are different types of life insurance policies, term life insurance policy being the most popular among them. Life insurance is a great investment for the individual holding the policy.

Let us discuss about the different types of life insurance policies in some detail. The major policies include:

• Term Life Insurance: Term life insurance is the name given to the type of life insurance that remains valid for a specific period of time, say a few years. They usually remain effective from 5 to 10 years and can be continued up to 30 years. The policy comes to an end after the specific time period. If the insurance holder passes away during the time period of the policy, the entire value of the policy will directly go to the beneficiary enlisted in the policy. Most of the insurers provide the policy holders with the option to change term policy into permanent policy within a stipulated time period. To see an example, the policy might have an option to change within the first four years of the policy. This condition is profitable if you have already suffered from an illness that forestalls you from purchasing another life insurance.

• Whole Life Insurance: This type of life insurance policies are meant to cover your entire life and not just a specific period. The premiums are level all throughout the validity period of the policy and the insurer invests a stipulated portion of the premiums. There are some companies that offer a comparatively low guaranteed rate of return, but practically pay more than the rate guaranteed during the contract.

• Variable Life Insurance Policies: This is another major type of life insurance policy. The policy holders of variable insurance policies enjoy a larger range of investment products like stock funds. In this type of policies, the ROI (Return on Investment) can counterbalance the cost of premiums. And based on the type of insurance policy, the recievers will either get the face value of the policy or receive both the face value and the entire of part of the cash account.

• Universal Life Insurance: This type of life insurance policies provides you with the liberty to decide the amount of money you want to invest over and beyond a minimum premium. The insurance company offering this policy selects the investment tool which is usually restricted to mortgages and bonds. Both the invested amount and the returns are transferred to a cash-value account that can be used against premiums. With some specific policies, the cash account moves toward the policy’s face value upon the death of the life insurance policies, holding individual.

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