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Types of Life Insurance |
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There are mainly two major types of life insurance: Term insurance and Whole life insurance. Whole life is also known as permanent life insurance. Several other types of life insurance, including traditional whole life, universal life, variable life and variable universal life come under Whole Life Insurance.
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Term Insurance
Among the two major types of Life Insurance, Term Insurance is the most simple form. It pays only if death occurs during the term of the policy, which ranges between one to 30 years. Most term policies do not have any other benefit provisions.
There are two basic types of term life insurance policies. They are level term and decreasing term. Level term means that the death benefit remains same throughout the duration of the policy.
Decreasing term means that the death benefit gets reduced over the time period of the policy’s term.
Whole Life/Permanent
Whole life insurance or permanent insurance pays a death benefit whenever the insured person die irrespective of his age. There are three types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life. Again there are more variations within each type.
In case of traditional whole life, both the death benefit and the premium are designed to remain constant throughout the life of the policy. The cost per $1000 of benefit increases as the insured person gets old. It bviously gets very high when the insured lives to 80 years of age and beyond that. The insurance company could charge a premium which increases every year. But generally the insurance companies charge a higher rate in the beginning of the policy and as the person gets aged the premium value becomes constant.
During 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life insurance product. They are universal life insurance and variable universal life insurance.
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