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Life Insurance

A Short Guide To Life Insurance

Life insurance is a type of insurance that is designed to pay money to a designated person if the policyholder passes away. This insurance is a contractual agreement between the policyholder and the insurance company. As long as premiums are paid, the insurance company will pay upon the death of the covered person, with a payout that depends on the amount of the policy. There are three types of policies available.

Term life is one of these policies. It is a policy without a cash value. Due to this, people often choose it because the premiums are much lower than other life insurance policies. This type of coverage provides the policyholder with a specific amount of coverage for a specific period of time, known as the term. For example, a term policy can be valid for 10, 20, or 30 years. Premiums are set as a fixed rate for the term.

Whole life is another policy available. With this insurance, the benefits paid out include both a death benefit and a cash value. The policy continuously builds cash value, similar to a savings account, ensuring that when a covered person passes away, the benefits are paid in addition to the policy amount. Policyholders are also able to borrow against the cash value amount if needed, unless it is a variable policy. The premiums are slightly higher than term life.

Universal Life insurance is the third policy type. A universal policy is a lifetime insurance that allows the policyholder to change premium amounts, death benefits, and aspects of the cash value including how much goes to premium payments and how much is invested. On the other hand, a universal variable policy is a combination of a variable whole life policy and its investment flexibility with a Universal Life policy and its abilities to change benefit and premium amounts.