Life Insurance at a glance
There are many kinds of insurance policies that can be purchased by people. Of these a Life Insurance policy is the one which covers a person for his or her entire life.
It is a contractual agreement between an individual and an insurance company whereby an insurance company pays a certain sum of money after the death of the policy holder. The policy holder on the other hand during his life time pays a premium to the insurance company.
Insurance companies pay the agreed sum of money only if the death of the policy holder takes place as per the insured events that have been specified in the contract.
The most commonly stated insured event in life policy contracts is serious illness.
Life insurance policies can be of different types. On the basis of the needs and requirements, a person can purchase the plan that appears to be the most feasible.
A term life insurance plan is the most commonly used life plan that is opted for by many people. Also known as a temporary life policy, this plan covers the life of the insured person for a specified period of time. This period may be 5 years, 10 years or even 20 years. During the term of the policy, if the person insured dies, the insurance company pays the sum of money to people who have been named as beneficiaries in the contract. On the other hand, if the term of the policy ends and the policy is not renewed, the beneficiaries are not paid any cash benefits.
Whole Life Insurance plans are the ones which cover an individual for his or her entire life. There is no fixed time interval after which the policy expires. When the policy holder dies, the insurance company pays a specific sum of money to the beneficiaries named in the policy.
The premium for term life policy stays the same as the value of this policy is divided over many years. In this life insurance plan, cash benefits accrue over a period of time and are paid in lump sum.
Universal life insurance is the type of life policy in which the insured person is covered till his death. The value of this policy is divided into cash and death benefits. The cash benefits in this type of policy do not accrue over time and can be withdrawn as and when required by the policy holder.
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