Types Of Life Insurance

Life insurance protection comes in many forms, and not all policies are created equal, as you will soon discover. While the death benefit amounts may be the same, the costs, structure, durations, etc. vary tremendously across the types of policies.

Whole Life

Whole life insurance provides guaranteed insurance protection for the entire life of the insured, otherwise known as permanent coverage. These policies carry a "cash value" component that grows tax deferred at a contractually guaranteed amount (usually a low interest rate) until the contract is surrendered. The premiums are usually level for the life of the insured and the death benefit is guaranteed for the insured's lifetime. 

Understanding Your Insurance Contract

Almost all of us have insurance. When your insurer gives you the policy document, generally, all you do is glance over the decorated words in the policy and pile it up with the other bunch of financial papers on your desk, right? 

If you spend thousands of dollars each year on insurance, don't you think that you should know all about it? 

Your insurance advisor is always there for you to help you understand the tricky terms in the insurance forms, but you should also know for yourself what your contract says. 

Costs, insurability, and underwriting in life insurance

The insurer (the life insurance company) calculates the policy prices with intent to fund claims to be paid and administrative costs, and to make a profit. The cost of insurance is determined using mortality tables calculated by actuaries. 

Actuaries are professionals who employ actuarial science, which is based in mathematics (primarily probability and statistics). Mortality tables are statistically-based tables showing expected annual mortality rates. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.

Parties contract in Life Insurance

Life Insurance is a type of insurance paid to the nominee after the death of insured person. It promises reimbursement if any loss happens to the assured person.

Insurance amount will be given to the insured person at the expiration of insurance period. The owner and insured is often the same person, there will be some differences between them in some cases. For instance, if a person buys a policy on his own life, he is the owner and the insured. 

But if his wife buys a policy in his name he is the insured and his wife is the owner. The policy owner is responsible to pay for the policy without any fail. Insurable interest can control an unrelated party from taking life insurance on.

What is life insurance ?

Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. 

Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (the "premium") at regular intervals or in lump sums.