subject: Different Types Of Life Insurance Policies [print this page] The Definition of Life Insurance
An individual who buys life insurance is paying the insurance company to assume certain risks, particularly the loss of income associated with your death. Upon the death, the company pays a death benefit to the beneficiaries named in the policy. This "death benefit" compensates the beneficiaries for lost income, can cover estate taxes, or leave a legacy for your family.
Basic life insurance need arises when an individual"s wealth (or assets) is insufficient to compensate dependents for his or her unexpected death. This insurance need is strongest for the young, who have not yet accumulated substantial wealth but who may well have spouses and children dependent on their income.
Whole life, also known as permanent life insurance, and term life are the two basic types of life insurance. Whole life premiums are necessarily much higher than term life premiums, at least until the insured reaches an advanced age. Certain specialized insurance needs, however, may require permanent insurance. Examples include insurance for burial or final expenses, business succession, estate planning and key persons.
Cheap Term Life Insurance
Term Life Insurance is the original form of life insurance. Term life insurance is only geared towards a death benefit, as it carries no cash value. The premiums cover only the insurance cost, which is based on life expectancy. As a result, term life insurance premiums are the cheapest kind of coverage received than other types of life insurance.
Typically, young people enjoy much better health and a lower possibility of death, which allows them to pay lower life insurance premiums. As a result, term insurance premiums tend to be lower for young people who are starting a family, when insurance protection tends to be of paramount importance.
Therefore, term life insurance is ideal for younger insureds with insurance needs that will go away at some point, and who are not interested in using their life insurance as an investment vehicle.
Learn more about Term Life Insurance
by: Mike Rowan
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