The Types Of Life Insurance – A Quick Glance


Death is an inevitable truth for each individual. There is no escape from this truth for anyone of us. However, the thought of the sudden demise of your existence makes you numb, when it comes to safeguarding the future of your family.

Here, life insurance acts as an ultimate savior by providing financial benefits at the right time.

Types of Life Insurance

There are two major types of life insurance which one can choose as per feasibility. Furthermore, these types are divided into a subcategory for more insight. Both the Sub-Categories are explained in depth below.

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1. Term Life Insurance

This type of life insurance is completely based on the tenure of the policy. In other words, if the demise of the insured occurs only within the term period mentioned in the policy, then the beneficiary can avail the death benefit. Further, there are level term and decreasing term as two subcategories under Term Life Insurance. In level terms, the insured amount remains the same for the entire period of the policy. Whereas, the death benefit decreases after the first year of the policy in decreasing term life insurance.

2. Whole Life Insurance

Also, known as permanent life insurance. It is termed as permanent because the policy prevails till the time the policyholder is alive. Here, even if the policyholder deceases at any time, the beneficiary will get the insured amount.

The foremost advantage is that there is no stipulated time frame. As a result, there is a surety that the nominee will definitely receive the death benefit.

Additionally, there are three major subcategories in whole life insurance. First is the traditional whole life, where there is no change in the insured and the premium amount. The policyholder pays the same premium amount on regular basis for the stated insured amount.

Second is Universal or Adjustable Life Insurance. Here, the policyholder has the freedom to quote both the both premium and insured amount, to be paid by him/her.

Though, the insurance company states the minimum flooring amount to cover the cost of insurance (COI) and protect the policy to lapse. Secondly, the premium payment is credited in the savings account, which is later divided into COI and cash value. All the essential cost is covered by COI and excess amount falls under Cash Value.

The policyholder is benefited by the interest amount on the cash value by the insurance company. The interest rate is either minimum of 2% or as per the market rate, whichever is higher. In short, the policyholder is benefited with both death benefit and interest amount on excess premium payment.

The third is Universal-Variable Life Insurance. This is an advanced version of universal life insurance. To be more elaborate, the insurer has the privilege to also invest the excess amount of the premium “cash value” into the market.

For this, the savings account is further segregated as a sub-account, through which all the investment is operated. The insurer can decide how much excess premium to invest in and remain as cash value. This product has given a broader concept to life insurance, which is incorporated with several benefits.

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Irrespective of the type of life insurance you pick, each one intends to have the same motive “to protect your loved ones after your demise”. As the course of time changes, there is always an effort by the concerned institutions to make this product more reliable and liable.

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