Definition

Life insurance is an agreement between the policyholder and the insurance company. The first policyholder pays the premium then in return insurance pays a lump sum payment. For example, an Insurance company helps you and your family after death.

Policyholder families can use the amount to fulfill their basic needs. On the other hand, family pay their everyday bills and can bear the expenses of the children's education. And also your family fulfill their dreams that you were planning for. 

What does Life insurance cover? 

Life insurance covers all causes of death except Suicide. Life insurance covers ends from diseases, illnesses, accidents, and homicide. Death from suicide does not cover insurance policy.

Policyholder is responsible to tell all truth about life. If you tell lie and make lame excuses, for example, you lie about your health or put the wrong information on the application, then the life insurance company will not provide you assistance or any help. 

Primary types of Life insurance

There are two primary types of Life insurance

  • Term Life Insurance
  • Permanent life insurance

Term Life Insurance 

Term Life Insurance is the most popular type of life insurance. Term life insurance provides coverage for a specific period of time and the premium payment remains the same amount for the policy period. Policy lengths are 10, 20, and 30 years. 

If you die within your policy term, your family can claim and acquire the death benefit amount without tax. If you survive till the end of the term, the policy will lapse and you will not get the death advantage. After the policy expires, the policyholder can renew coverage within 1-year increments, known as guaranteed renewal.

Permanent Life Insurance

Permanent life insurance provides whole life insurance. It is more costly than term life insurance because it may last for the duration of your life. A permanent life insurance policy increases the cash value over time. 

If you choose to terminate the policy, you can get the cash value without any self-denial charge. In some policies the cash value can increase slowly after many years, so don't count on accessing a huge cash value right away. Your policy example will show the cash value offered.

Following are some types of permanent life insurance:

Whole life insurance:

Whole life insurance suggests a fixed death advantage and a guaranteed rate of total return under the lump sum component. Life insurance policies considered under pay dividends, which are unsecured, then can increase premium payments and reduce deductibles.


Universal life insurance:

Universal life insurance benefits a lot more than whole life insurance. Policyholders can change their premium payments and death benefits within specific limitations. The cash value will depend on the policy type.

Burial insurance:

Burial insurance gives death benefits. A burial insurance policy pays only for final expenses and funeral costs.

Survivorship life insurance:

Two people are insured under one policy, usually a married couple. For example, if both dies then the benefit will go to their family. Generally, the survivorship life insurance amount goes to a Trust fund or pays state and federal taxes and became part of a larger financial plan.


 Permanent Life Insurance VS Term Life Insurance 

  •  

    Permanent Life Insurance

     

    Term Life Insurance

    1. Permanent life insurance provides whole life insurance.

     1. Term life insurance provides benefits for a specific period of time 10, 20, and 30 years.

     2. Permanent life insurance is costly.

      2. Term life insurance is not costly.

     3. Permanent insurance creates cash value.

     3. Term life insurance bears a death benefit.

     4. A permanent life insurance policy increases the cash value over time. 

     4. If you die within your policy term, your family can claim and acquire the death benefit amount without tax.

FAQS

Is Life insurance beneficial?

Yes, Because it protects you from any mishappening.

Which type of Life insurance gives more advantages?

Term life insurance gives more benefits because it is less costly.

Is Term life insurance and permanent life insurance the same term?

No, because their policies, and ways of working are different from each other.

Which insurance creates a cash value?

Permanent life insurance creates a cash value.

Source: For updated information on insurance visit https://www.investopedia.com/.