Everyone needs life insurance because we never know what can happen in the future .Life insurance is a contract between the insurance holder and the insurance company that obligates the insurer to pay a certain amount of money in exchange for a premium, upon the death of the insured party. To be simply put, Life insurance is a program where a person pays a certain amount of money either occasionally or as a lump sum to an insurance agency and in exchange the insurance agency is obligated to pay any amount agreed in the contract, in the case of death of the insured party. Life insurance contracts can also be trigged by critical or serious illness depending of the terms set in the contract.
TYPES OF LIFE INSURANCE:
· Term Insurance
This is the simplest type of life insurance that can be purchased. Its benefit is triggered only in the case of death of the insurance holder. It offers no cash value. Due to this, it is usually very affordable especially to those younger and healthy at the time of application. Term Life insurance is always purchase for periods as long as 10-30 years and even longer sometimes. The amount of premium paid is constant throughout the Time of the insurance.
· Increasing and Decreasing Term Insurance
In some term insurance, death rewards go down over time. This is called decreasing term insurance. The premium remains constant however. In this case, the policy ends as soon as the death benefit gets to zero. There are also term policies which the death rewards increases over time. This is known as increasing term Insurance.
· Whole life insurance
This type of life insurance is designed to remain valid as long as the insurance holder is alive and premiums are paid regularly. It is commonly called “straight life” or “ordinary life” insurance. Whole life insurance ensures that premium is constant and the insurance would earn cash value.
· Permanent
Permanent insurance is valid for the remaining lifetime of the insurance holder. It is commonly called “cash value insurance”. It accumulates cash value due at its maturation date. The cash value can be borrowed and paid back and the insured party can give up the policy and collecting the surrender value.
· Universal Insurance
It is considered to between whole and tem life insurance. This plan is flexible in the sense that the insured party is allowed to determine how much of his premium goes to the insurance’s death policy and how much would be directed to the insurance cash value. Universal life insurance is a type of permanent which means cash can be borrowed and returned for any use from the cash value account.
· Variable Insurance
This is also a type of permanent insurance policy. It also offers both death rewards and cash value but the cash value growth depends on designated funds. E.g. equity bonds. This type of insurance is riskier than a whole life insurance.
· Variable Universal Insurance
This is one of the popular types of variable life insurance. It is a riskier insurance in the sense that, if the market suffers a down turn, the insurance would require more premiums to maintain the policy. The policy holder is allowed to invest his cash into various investments such as mutual funds.
· Survivorship Insurance
In this case, the insurance policy covers more than one person. This policy can be done in various ways. One of the ways is to pay out when the first person dies. In this insurance, premium collected may be higher than cost of purchasing an insurance for one person but still lower than purchasing two separate insurances. This policy could also pay out when the second person dies and they usually require less strict underwriting.
· Final Expense Insurance
It is commonly known as burial insurance. It is mostly purchased by the age group considered as seniors (50-85).Although; some companies offer this insurance to people who are older. It is aimed at those who know their deaths isn’t far away and would not want to burden their loved ones with the cost of the burial ceremony. An average cost of carrying this out is about $10,000 which most families just don’t have lying around.
· No Medical Exam Life Insurance Coverage From the name, we can deduce that this type of insurance would not require any type of medical examination from the policy holder. When purchasing mot insurance, there would be need for a medical test (overall medical checkup).Those who fail the exam would not be granted the insurance but this is not required in this type of insurance. Due to this, they are always approved on time (1-2 days after application).