Classification of Life Insurance
Though it comes in many forms, all life insurance policies serve a main purpose: to provide financial resources to a decedent's family when the decedent dies. The main differing factors in all life insurance policies are cost, length of coverage and any accumulation of cash value. Therefore, depending on the type of life insurance, how much an individual is willing to pay for it and the length of coverage desired, insurance policies can vary greatly. Different classifications of life insurance are in place to satisfy the varying needs of individuals.
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Whole Life
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Whole life insurance is the most permanent type of life insurance. Coverage continues for the entire life of the insured. Premiums for whole life policies are fixed and are usually more expensive than other policies because of the guaranteed benefit. Some whole life policies have the option of building cash value (the amount of cash available when a policy is canceled).
Term Life
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Term life insurance covers the insured only during a specified period of time. Premiums are less expensive; however, the insured runs the risk of running out of coverage and having to purchase more life insurance at a later date. Term life policies do not accumulate a cash value like whole life policies.
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Variable Life
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Variable life policies are a type of whole life insurance that has a separate investment account which directly affects the death benefit and cash value amounts. This investment account gives the insured the opportunity to have diversified investments and therefore has greater growth potential. The premium cost is fixed; however, the death benefit and cash value can fluctuate.
Universal Life
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Universal life policies are another form of permanent insurance that offers flexible premiums. The death benefit is guaranteed, but the cash value can fluctuate. If enough cash value accumulates, payment of future premiums might not be needed.
Variable Universal Life
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Variable universal life policies combine the flexible premiums of universal life and the investment options of variable life. Sufficient cash value amounts allow flexibility in premiums. These policies allow an individual to change his coverage as his needs change.
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References
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Comments
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pls explain more about LIP.
