The general principle of life insurance is an agreement between an individual who purchases an insurance deal and the insurance company he purchased it from. This bond benefits both parties, as both get paid but in different ways. The insurer gains by the premiums paid gaining a profit as the years go on, and the individual benefits in retrospect, as his partner and children will be compensated when the unfortunate happens.
There are many types of life insurance an individual can buy, and the type best suitable depends on various alternating factors such as critical illness, accidental death, temporary, permanent or even if he has the mortgage tied in with the policy. We have many more Life Insurance Help Articles Now Available.
So, who needs Life Insurance?
That Question is probably the most simple you will ever come across. Depending on the status of your loved ones, I think most people will require it for the sole purpose of helping your family escape financial difficulty and for your own peace of mind.
The Basic types of insurance as stated above suit different individuals in different ways depending on what they want to get out of their insurance. Now Life Insurance can get a lot more complicated when digging deep, such as including riders and add-ons for extra benefit, but below summarises the basics.
This insurance provides cash value over time with a tax-deferred basis, and some insurance companies may even pay the policyholder a dividend. This type of insurance would be highly recommended by many due to the cash value that is available for you or your family before you die. It helps with many life aspects such as providing for your children’s school education, or for your retirement funds. This type of cover is more situated for protection of your family’s interests.
Being the least expensive, it is also the simplest. Temporary policies are fixed over an extended period of time (usually 1-10 years) and don’t amass a cash value. This form of life insurance pays a fixed amount to your spouse in the event of your death. Simple in the fact that the premiums are paid and the beneficiaries are looked after.
This type of life cover is a flexible plan. These policies increase interest and allow the owner to adjust the death benefits and premiums to their current life circumstances. You decide the amount to be paid as a premium for this type of insurance, and if you miss out a payment, this will be taken away from your death benefit. Universal life insurance stays in consequence as long as your cash value can cover the costs of the policy.
Variable life cover is for individuals who like their life insurance policy to act simultaneously to the financial market. The policyholder, not the insurer, decides how the money is invested and the cash value, if done right, can gain at a much more rapid rate in comparison to other plans. The disadvantage of this plan is that if the financial market is in poor economic state, then so will be your life policy. Similar to whole life and universal life insurance, you may withdraw against the cash value.
Hope this helps with the general basics of life insurance cover and the various types. We have many more Life Insurance Help Articles Now Available.