We’re guessing two reasons you’re on this post: First, you’re considering weighing the options you have on the different policies on life insurance. Invariably, you have an idea or two on basic insurance practices. Second, you’re seeking to gain novel insights into the inevitable space of Insurance for inquiry reasons. We hope we nailed the guesses right.
Irrespective of the category you belong to, we have designed the tailored experience to whet your appetite. Although this piece is set to help you make a comparison between the types of Life Insurance Policies, we shall build upon the foundational knowledge of Life Insurance. Did you miss our enlightening post on it? Not to worry, you can check it out here.
A Quick Glance At The Life Insurance Policy:
A Life Insurance Policy holds between the insurer (otherwise referred to as the insurance company) and the policyholder – the person in whose name the insurance policy is held. In many instances, the Life Insurance Policy prepares you for unforeseen circumstances, or better still, provides financial protection to one’s surviving dependents.
What does this even mean? Life Insurance is commonly associated with the post-demise benefits of a policyholder. When life happens, the insurance company guarantees the payment of a death benefit to beneficiaries which would have been named by the policyholder – prior to their death. Other than this, a Life Insurance Policy could also appeal to permanent disability or medical expenses resulting from hospitalisation.
Broad Types of Life Insurance Policies:
The Life Insurance Policy is broadly categorised into two: The Term Life Insurance and Permanent Life Insurance. The major difference between the duo lies in the duration of the policy. Shall we take a more profound look?
1. The Term Life Insurance Policy:
Also referred to as ‘Pure Life Insurance’, Term Life Insurance Policy is the most basic and cost-effective of the Life Insurance Policies. Here’s one reason you may want to stick with this policy.
Here, the policy is bound by time. For instance, a policyholder may choose to secure a policy spawning across 10, 15 or 30 years. Some insurance experts say this plan is suitable for young people – preferably from their 30s upwards.
The Term Life Insurance Policy is however restricted to the death benefit. Unlike its Permanent Life Insurance variant, it doesn’t attract supplementary packages like savings and favourable tax payment. It goes to say that if the policyholder passes away before the expiration of the contract, the insurer pays the face value of the policy. A face value refers to the death benefit that is insured to the beneficiaries, following the demise of the policyholder. If the policyholder doesn’t, however, pass away, the insurer provides no payout and such a policy may be renewed.
2. The Permanent Life Insurance Policy:
The Term Life Insurance Policy appeals to the flip side of the Permanent Life Insurance variant. Here, insurance plans do not expire. That’s right, we read that in T’Challa’s voice: “We don’t do that here”.
The supplementary packages unavailable in the Term Life Insurance Policy can be tapped here. You may want to consider this an edge. Other than the savings advantage, this policy integrates a Cash Value System. In clear terms, the Cash Value System allows the insured to borrow funds in attending to financial obligations.
This may include medical expenses from hospitalization (like we have duly mentioned earlier) or tuition fees. Looking to learn more about Health Insurance? Be our guest.
The Permanent Life Insurance Policy is further subdivided into two:
The Whole and Universal Life Insurance Policies:
While they both integrate the savings plan, the latter adapts more flexibility than the former. In other words, the Universal Life Insurance Policy permits the leeway to either increase or decrease the death benefit of the policyholder.
The Whole Life Insurance Policy however operates a consistent modus operandi. It covers the policyholder for how long they live – regardless of how long it is. However, they have to keep paying the fixed amount of premium to receive the death benefit.
In choosing a Life Insurance Policy, we recommend you consider a number of factors.
Age, for instance, plays a pivotal role in the selection of a life insurance policy. This is because some policies have age restrictions. As a young individual, you have the opportunity to choose from a range of options, as opposed to a sexagenarian.
Factors like financial capabilities and budget, as well as the duration of need, should not be marginalized in choosing a life insurance policy.
Life is unpredictable.
Click here to get covered today.