Life Insurance
Life insurance, which is also referred to as life assurance, is a form of insurance that pays a specified amount of money to a designated person when the insured person passes away. In order to receive this coverage, the insured person must pay a certain amount of money at predetermined intervals. Depending on the life insurance policy, the premiums may be paid once per month, once every six months, or once per year. Many life insurance companies will discount the cost of the premium if the insured chooses to pay for an entire year at a time rather than make monthly payments.
There are several different types of life insurance a person may select from, including:
- Term
- Whole life
- Universal
- Limited pay
- Endowment
Each of these forms of life insurance has its own unique characteristics that must be examined in order to determine which is the best for the individual person.
Term Life Insurance
Term life insurance provides the insured person with coverage for a pre-determined number of years. During this time, the agreed upon premium remains the same. Unlike other forms of life insurance, however, term life insurance does not have cash value. In addition, these policies are only issued to individuals that are unlikely to pass away within the timeframe of the policy. As such, the premiums for a term life insurance policy are typically low.
Whole Life Insurance
Whole life insurance does provide a cash value to the insured person, though a whole life insurance policy generally should not be viewed as a "savings plan." In addition, the annual premiums remain unchanged, which makes it easy for the insured person to plan for payment of the premium.
Universal Life Insurance
Universal life insurance provides permanent coverage to the insured person but allows for flexibility in regard to the premium payment cost. As with a whole life insurance policy, a universal life insurance policy does have a cash value. In addition, the cash value of the policy increases according to the premium.
Limited Pay Life Insurance
Limited pay life insurance is a form of permanent life insurance that allows the insured person to make payments toward the premium for only a set amount of time. After reaching this pre-determined timeframe, the insured person no longer needs to make premium payments in order to keep the policy.
Endowment Policies
Endowment polices are those that have a specific cash value that is built up within the policy. This amount of the death benefit is reached at a certain age, which is known as the endowment age. The premiums for an endowment are much more expensive than for a while life insurance policy or a universal life insurance policy because the period during which the premiums are paid is much shorter. This insurance is paid out to the benefactor whether the insured person is still alive or has passed away, but it is not paid until a certain period of time has passed or until the person reaches a specific age.
|
|
|
