Life Insurance Plans are quite extensive in nature and they have become quite popular nowadays.
The Life Based Policies are categorized into two main types:
- Investment Policies: The principal aim of Investment Policies is supporting capital growth by payment of single or regular premiums.
- Protection Policies: They are planned to offer benefits in forms of lump sum payments if there is an occurrence of a specific event.
In case of a Life Insurance Contract or Agreement, there has to be three parties present: the Insurance Company, the insured person, and the policyholder. Nevertheless, in most of the cases the policyholder and the insured person is the same.
After the insured person's death, adequate death proof has to be presented to the Insurance Company for the receipt of claim.
Life Insurance Plans are categorized into two main types : Temporary Life Insurance and Permanent Life Insurance. They can be also categorized into the following subdivisions: Term, Universal, Whole Life, Variable, Variable Universal, and Endowment Policies.
Temporary (Term): Temporary Life Insurance (Term Assurance According to British English) offers Life Insurance Coverage for a certain period of time for a specific amount of premium. In case of a Term Life Insurance, cash value is not accumulated. Term Life Insurance is also known as Pure Life Insurance. The rate of premium of Term Life Insurance is substantially low. In Term Insurance, the three major factors for consideration are the face amount, the premium and the term of coverage. The Term Life Insurance is categorized into the following types:
- Annual Renewable Term
- Level Term Life Insurances
- Term Life Insurance with Return of Premium (ROP)
- Term Life Insurance No Exam
Permanent Life Insurance: This type of Insurance Policy stays active till the time of maturity, but if there is a failure on behalf of the policyholder for the premium payment when it is due, the policy will expire. Usually, Permanent Life Insurance are categorized into three types:
- Whole Life Coverage: Whole Life Insurance Coverage offers a level premium and the company guarantees a cash value table, which is a part of the policy. The principal advantages of Whole Life Coverage are: Guaranteed Cash Values, Guaranteed Death Benefits, specified and accepted annual premiums. The cash value depicted in the policy is not cut down by mortality and other expenditure or charges. The main drawbacks of Whole Life Coverage are inflexibleness of premium and the incompetency of the IRR (Internal Rate of Return) compared to other savings options.
- Universal Life Coverage (UL): Universal Life Insurance is comparatively a new kind of insurance product. It provides permanent insurance coverage, the premium payment is highly flexible, and there is a possibility of better Internal Rate of Return (IRR).
- Endowment Policy: In case of Endowment Policies, the cash value accumulated by the policy is equal to the face amount (death benefit) at a definite age. The endowment age is that age when this policy starts. These policies are more costly (annual premium payment) compared to Universal Life or Whole Life due to the reduced premium paying period and earlier date of endowment.
Variable Universal Life Insurance: This is a kind of Life Insurance in which a cash value is accumulated and it can be invested in a wide range of separate accounts like mutual funds.
