Information about Life Insurance

Life Insurance:. Insurance or commonly life insurance, especially in the Commonwealth is a contract between an insured insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of insured person. Depending on the contract other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses are also sometimes included in the benefits.
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer: common examples are claims relating to suicide, fraud, war, riot, and civil commotion.
Life based contracts tend to fall into two major categories:.

• Protection Policies- designed to provide a benefit in the event of specified event typically a lump sum payment, A common form of this design is term insurance.
• Investment Policies- Where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms in the US are whole life universal life, and variable life policies.

Term Life Insurance:. 

Term assurance provides life insurance coverage for a specified term. The policy does not accumulate cash value Term is generally considered pure insurance where the premium buys protection in the event of death and nothing else.
There are three key factors to be considered in term life insurance:.

1. Face amount,
2. Premium to be paid,
3. Length of coverage.

Annual renewable term is a one year policy, but the insurance company guarantees it will issue a policy of an equal or lesser amount regardless of the inseparability of the applicant, and with a premium set for the applicant's age at that time.
Level premium term can be purchased in 5, 10, 15, 20, 25, 30 or 35 year terms. The premium and death benefit stays level during these terms.
Another common type of term insurance is mortgage life insurance, which usually involves a level-premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner's property such that any outstanding amount on the applicant's mortgage will be paid should the applicant die.

Permanent Life Insurance:.
Permanent life insurance is life insurance that remains active until the policy matures, matures unless the owner fails to pay the premium when due. The policy cannot be cancelled by the insurer for any reason except fraudulent application, and any such cancellation must occur within a period of time defined by law.

Whole Life Coverage of Life Insurance:.
Whole life insurance provides lifetime death benefit coverage for a level premium in most cases. Premiums are much higher than term insurance at youger ages, but as term insurance premiums rise with age at each renewal, the cumulative value of all premiums paid across a lifetime are roughly equal if polices are maintained until average life expectancy. Part of the insurance contract stipulates that the policyholder is entitled to a cash value reserve, which is part of the policy and guaranteed by the company. This cash value can be accessed at any time through policy loans and are received income tax free. Policy loans are available until the insured's death.

Universal Life Coverage:.
Universal life coverage (UL) is a relatively new insurance product, intended to combine permanent insurance coverage with greater flexibility in premium payment, along with the potential for greater growth of cash values. There are several types of universal life insurance policies which include interest sensitive variable universal life guaranteed death benefit and equity indexed universal life insurance.
A universal life insurance policy includes a cash value. Premiums increase the cash value. Premiums increase the cash values but the cost of insurance reduces cash values.