There are two primary types of life insurance policies; protection centric policies and investment centric policies. Like other personal insurance policies, protection based life insurance policies are designed to provide lump sum claim settlements should the policy holder suffer from a specified event such as death or serious illness. Permanent policies, on the other hand, are often investment based life insurance policies which combine a traditional settlement with a savings component designed develop invested capital for the policyholder throughout their life.
Common Life Insurance Policies:
Term Life Insurance
Term life insurance is possibly the simplest form of life insurance, and often the most prevalent among consumers. Term life is a protection-centric policy which provides claim coverage to the policy holder for a specified period of time. These policies have no investment component; policy holders simply pay a monthly premium for the desired coverage for a specified length of time. Typical terms policies range for annual renewal to up to forty year coverage.
Whole Life Insurance
Whole life policies are a type of permanent insurance which combine claim settlement allotments with an investment fund. Policy holders essentially purchase a policy that pays a stated, fixed amount upon death or serious illness and part of the premium is invested by the insurance company on your behalf. Policyholders therefor reap some financial gains from the successful investment of these funds.
Universal Life Insurance
Universal life is similarly a type of permanent insurance that combines term insurance with investment component. The investment is typically in money-market securities that often pay a more variable return rate; therefore these policies generally don’t guarantee a certain return rate.
Variable Life Insurance
Variable life and variable universal life are permanent life insurance policies with an investment fund tied to stock or bond mutual-fund investment. This policies are often more risky as any returns on the policy holder’s investment are not guaranteed.