InsuranceLecturer — Insurance has generally become an indispensable part of our daily life, as a result of which, various kinds of insurance have emerged to meet the diversified needs of modern people, like auto insurance, property insurance, medical insurance as well as life insurance.
Well, the greatest advantage of this insurance is bringing peace of mind since with this insurance you know that if you leave, your loved ones will not suffer from financial difficulties.
As with other insurances, life insurance can be divided into several types according to different standards. The following are two types of life insurance and their respective features:
Term Insurance
Term insurance is said to be the simplest form of insurance policy, which provides coverage at fixed rate of payment for a specific term. The coverage at the previous rate of premium will no longer be guaranteed at the end of that period.
Simply put, you are only covered for a specific time period with this insurance. The premiums are very low, and the policy owner will receive only the face amount of the account if something bad happen to you, the insured, during the specified period. This insurance is typically purchased for a year, or 5, 10, 15 or 20 years.
Permanent Life Insurance
Contrary to term life insurance, permanent life insurance is a kind of life insurance which is active until the end of the policy or unless the policy owners fail to pay the insurance premium. It is also known as whole life insurance and cash surrender life insurance, which provides customers with guaranteed cash value accumulation as well as a consistent premium.
This way, the cost of the insurance is very high compared with that of term insurance, particularly for senior customers. Permanent life insurance can also be divided into five basic types.
- Universal life insurance. As a new type of insurance product, universal life policy features quite flexible premiums and the policy owner can choose the amount of payment. Variable universal life, guaranteed death benefit and equity indexed universal life insurance are several sub-types of universal life insurance.
- Whole life insurance. It provides lifetime death benefit coverage for a level premium. This permanent insurance is pretty similar to term insurance, but it is much better. The biggest advantage of whole life policy lies in the guaranteed death benefits, guaranteed cash values, fixed, predictable annual premiums and mortality as well as expense charges. However, it also has disadvantages, like the premium is not flexible and the internal rate of return is not as competitive as it seems.
- Limited-pay life insurance. This insurance features all the premiums being paid over a certain period of time, like 10 or 20 years.
- Accidental death insurance. As a limited life insurance, accidental death is pretty inexpensive. It covers the insured when they pass away due to only accidents, which means death caused by health problems or suicide are not covered.
- Endowments insurance. The cumulative cash value of this policy is the same as the death benefit at a certain age. The premium is required to be paid off during a short period of time and the endowment will be paid out after a specific period or age.
