Business and Finance

The main purpose of insurance is to bring stability in life by providing hedging of the occurrence of any future mishap. Life insurance guarantees the stated amount or monetary benefit upon the death of the insured.

Preliminarily, ife Insurance/” target=”_self” title=”life Insurance”>Life insurance –

1. Provides add to the family members on the death of the breadwinner.

2. Provides cash benefit for future.

Types of Life Insurance:

1. Term insurance: As the name suggests term insurance provides you coverage over a certain fixed period of time. It provides death benefit only if you die in that term. It is the cheapest form of insurance as it has low premium .It generally does not build up cash value. Although the policy could be renewed for one or more term, there are certain conditions that apply: Firstly, Each time you renew a policy the premium may go high. Secondly, there are certain policies where in you may loose the right to renew at some age. In certain cases you may also need to pass physical examination to continue the coverage. One thing is good about the term insurance that they can be renewed even if your health condition has changed. In certain cases you may also swap many term insurance policy for a cash value within a given conversion period. You can do this even if you are not in a good health but certainly the premium would hike.

2. Cash value Life insurance: Apart from covering the risk of death, cash value life insurance safeguards you financial needs that may occur in future. Cash value life insurance charges high amount of premium at the beginning as compared to the same value of term insurance. The amount paid on the top of the cash insurance is invested by the company to build up a cash value. This type of arrangement allows you to use the cash value in the case of financial emergency without having surrendered the policy. Other than using the cash value on retirement and paying for needs such as child tuition you can also use your cash value for taking a policy loan. Cash value life insurance can be further classified in to whole life insurance, universal life insurance and variable life cash value life insurance.

a. Whole Life Insurance: Whole life insurance covers you for life long although the premiums you pay at the earlier stage are much higher than that in the case of term insurance. But eventually it costs you lesser than to keep renewing a term policy. Certain whole life policies have shorter period such as 20 yrs but with greater interest of course.

b. Universal life insurance:

This type of policy lets you adjust your premium payment as well as their face value of your coverage. In case you need to increase the value of coverage you need to provide proof to qualify the new death benefit. The policy maintains an account where your entire premium collects. The premium accounts holds also earn interest. All the charges are deducted from this account and any thing paid in excess builds up into a cash value. If your minimum payment plus interest is less than the charge than the account value becomes lower. If it keeps on decreasing then finally the coverage ends. Thus it’s always good to keep on paying your premium not only to retain your policy but also top earn higher cash value.

c. Variable Life insurance: Variable life insurance, you are suggested to go for this type of life insurance only if you are good with making life investment choices. This is because in variable life insurance the death benefit and cash value depends upon the investment performance of one or more account. The types of investment you can make are allowed by the policy you take. You should do a good research before taking a policy and while choosing the type of investment since the cash value and death benefit may lower or even ends if the investments are not doing well.

Thus by availing anyone of these types of polices you can ensure safety and future relaxation.