What Are the Different Types of Life Insurance?
Life insurance is essentially a legal contract between an insurer and an insurance policyholder, whereby the insurer promises to cover a designated insured individual a specified amount of money upon the insured person’s death. Depending on the contract, some events like critical illness or terminal disease may also trigger payments. Life insurance provides important financial protection for family members who rely on the insured for their livelihood. However, as with all contracts, there are certain aspects that need to be considered before agreeing to a contract. The key factors that should be borne in mind by people before taking out life insurance are:
Beneficiaries. There are different types of beneficiaries, for example, age-related, accident and critical Illness benefit. Insurance companies offer many options pertaining to the type of beneficiaries that they will pay. Usually, those who die as a result of a critical illness or terminal disease are entitled to a larger sum of money than others, depending on their age and the severity of their illness. Also, the insured’s partner and dependents will be compensated for loss of income and emotional support. However, there is a ceiling, which can be raised above the level of a ‘workers’ benefit, which will ensure that only the family and dependents receive full benefit.
Term Life Insurance. Term Life Insurance is taken out as a lump sum payment and is generally much cheaper in comparison with whole life policies. As the insured grows older, the premiums start to decrease. This is because term Life Insurance coverage remains valid until the insured reaches the age of 100. A good thing about term Life Insurance is that you can renew your coverage, which allows you to get extra cash back on your premium payments.
Policies are often bought in bundles of several life insurance policies. Sometimes a package will include Health, Life, Property and Annuities policies, which make it easier for people to get the benefits from one of the policies. Buying Life Insurance policies in bundles also allows you to get discounts.
Universal Life Insurance. An example of a Permanent Life Insurance plan is Universal Life Insurance. Unlike the whole life insurance plans, a permanent Life Insurance plan does not have any kind of limit. With Permanent Life Insurance policies, there is no need for an evaluation for whether or not the cash value of the account is high enough.
One type of Permanent Life Insurance policy features the following clause: “You may include a lump sum amount for your funeral expenses if you die during the grace period.” What this means is that your loved one would not only be able to buy a burial plot at their favorite church or cemetery, but they would also get their death benefits from the company even though they did not die in the event of the policy. This particular feature makes Permanent Life Insurance policies ideal for families. Another advantage is the Accelerated Death Benefit Rider, or ADR. As the name implies, the accelerated death benefit rider allows the beneficiary to obtain more cash when their loved one has passed away from an accident or other event within the policy’s terms.