Types Of Life Insurance Policies
Life insurance has become a necessity for many people worldwide. There are many companies that offer different coverage plans to the policyholders. There are companies in the US that have collaborated with other smaller companies in other countries to boost their business.
Note that any kind of life insurance policy is meant for the benefit of men, women and children. Life insurance is a formal agreement usually made between an individual and a group of people called the policyholder(s) and the insurer, which is a company. The agreement lists the clauses under which the specific company promises to pay a stipulated amount of money when the policyholder dies or the maturity period or duration of the policy ends. Till the duration of the policy, the policyholder is bound to pay a predetermined amount to the company and this called the premium. The premium needs to be paid at a fixed time — monthly, quarterly, six-monthly or yearly.
The rules and regulations of insurance companies worldwide are not same. But they are, by and large, similar.
Life insurance is mainly classified into two: temporary and permanent.
TEMPORARY INSURANCE
Under this category, a company provides insurance coverage for a predetermined period and it charges a fixed amount as premium to the policyholder. There are three aspects — face amount or protection / death benefit, exact premium amount and the duration coverage — that need to be understood before buying the policy.
PERMANENT INSURANCE
In this category, life insurance coverage remains till the policy reaches the predetermined maturity period or is in force till the policyholder fails to pay the requisite premium.
There are four types of permanent insurance policies. They are:
Whole life
Universal life
Limited pay
Endowment
Let us gather basic information about these four categories.
Whole life
The main advantage of this policy is fixed annual premium, guaranteed death benefit and cash values. The only disadvantage in this is no flexibility in the payment of premium in case the policyholder is hard-pressed during the policy period.
Universal life coverage
This is unique policy that offers more flexibility in the payment of premium. This policy also includes a cash account.
Limited-pay
In this kind of insurance coverage, the entire premiums amount is paid during a pre-determined period only. This period can vary from 10 to 20 years before the maturity amount is paid to the insured when the policy ends.
Endowments
In the Endowments policy, the cash value mentioned in the policy equals the death benefit at a fixed time. Compared to the Whole life or Universal life policies, this policy attracts a higher premium.
Before buying any policy, it is recommended that you understand all the clauses inherent in the chosen policy from the life insurance agent. This will avoid any legal hassles in the future.
Below are some life and health insurance companies in the US:
MetLife
Prudential Financial
New York Life Insurance
Mass. Mutual Life Insurance
UnumProvident
Assurant
Lincoln National
Pacific Life
Conseco
Torchmark
Unitrin