What is life insurance?
Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual’s or individuals’ death or other event, such as terminal illness or critical illness.
In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form simply specifies a lump sum to be paid on the insured’s demise.
Types of life insurance:
There are two types of life insurance classifications. The classifications are temporary and permanent insurance.
Temporary life insurance:
The term temporary insurance provides insurance for our life for years of specified terms and for specified premium where the premium gets protection in the event of death. This type of insurance has some factors that have to be considered.
The important factors are the face amount that we receive after the death, premium to be paid that is the insurance amount and the term period for that
Permanent life insurance:
Permanent life insurance is life insurance that remains in force until the policy matures, unless the owner fails to pay the premium when due. The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law. Permanent insurance builds a cash value that reduces the amount
at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollars face value can be relatively
expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.
This permanent life insurance is further classified into three types as the whole life, universal life and endowment.