There are two basic classifications of life insurance program. These are the temporary term insurance coverage, which is the least expensive and complicated plan, and the whole life plan, which covers several subcategories including death benefits, provides cash values and annual premiums.
Term coverage pays the beneficiaries of the plan if the policyholder dies within the time frame stipulated in the policy. The plan will compensate for the salary supposedly provided by the insured individual to his family when he was still alive. The insurer in a lump sum manner gives a specific amount in fractional periods to the surviving family, or beneficiary. This type of plan is further subdivided into level term and decreasing term.
Level term covers death assistance that stays the same all throughout the length of the policy. Here, the insured individual pays annuities, or equal payments, for a period of time. Incremental drops in premium characterize the second type usually in a period of one year. This is what is called as a decreasing term policy
Next we go to permanent life insurance types. Whole life security plans provides safety measures to the surviving family while at the same time building cash value account. During the lifetime of the policyholder, the insurer cannot increase or lessen the insured individual’s premium. This type of insurance also give the option of giving out dividends to the plan holder which can be used to pay for the premium or lessen the amount to be paid by the person availing the insurance policy. Furthermore, the security policy gives you the choice of withdrawing your account during your lifetime and allows the insurer to manage your cash value account exclusively. Lastly, this type of plan gives death benefits to the surviving family at the same time offers low risk cash value account. On the other hand, this type of plan does not offer account flexibility. It does not allow the policyholder to invest in different accounts like mutual funds, stock or any pecuniary matter.
Traditional whole life insurance is differentiated because it provides the same premium and benefits (cannot be changed or are constant) throughout the policy’s life span. The variable life insurance provides an indelible protection for the policyholder and his beneficiaries. It allows some degree of flexibility to the insured individual’s account. The plan allows the holder to borrow from the plan during his natural life. Universal life insurance offers more flexibility compared to the other two types of permanent security plans.
One should always be aware of the differences of each insurance policy to be able to get the plan which best suits your needs.