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Principal Kinds Of Life Insurance Policy

Having life insurance coverage is essential in securing the financial security of your loved ones against an illness, injury or death. But though the essence is the same, the reason for getting one is different for many individuals. For some it can be intended for paying off a home mortgage when the breadwinner suddenly passes away. For others it can be for providing enough financial resources for the beneficiaries to live normally.

A life insurance can be used for many situations. Therefore, the type of life coverage that you should get should match the purpose for which it was intended. There are many kinds of life insurance policies that can be used for different personal circumstances.

The first main type is known as a whole life insurance. This type of policy is also called universal life insurance. It is the most common and works as a basic insurance coverage which the insured has to pay a regular premium. Generally, the frequency of payment is monthly which provides protection for the insured during his entire life. However, the lump sum payment which the insurance company has to make upon death of the insured is calculated at the start of the coverage. The amount of premium which you have to pay regularly is based on this calculation. It does not consider the increase in wealth which the insured may accumulate as he grows older. Additional expenses which you may require later in life are also not factored in. however, it is easier to budget your premium payments since the amount is fixed over the entire duration of the policy.

The next principal type of insurance policy is called term life. Basically, it differs with a whole life policy in the continuous risk assessments that it does. As risk factors change, so does the insurance policy. These means that the premium you will regularly pay for such coverage is variable. High risk individuals pay a higher amount of premium while low risk clients pay lower. If you are considering which one of the two main types of policy are best for you financially, you need to think about your age, health, family history and driving record.

The age that you get an insurance policy is considered in calculating the cost of your premiums by your insurance agent. This is because your mortality risks get higher as you grow older. Your health also matters much in your risk assessment. Factors that are considered under the health category include, your lifestyle, whether you are overweight or not and if you are a smoker or a non smoker. Family history is taken in because of the fact that many serious diseases are hereditary in nature. If you have a family member who died from heart attack, stroke or cancer, you may have to pay a higher premium. Background checks are also conducted by insurance companies to check on your driving habits. If you have a poor driving record, your insurance premiums will be higher. Both types of policies require that you submit to a physical check up.