There are many kinds of insurance policies that can be purchased by people. Of these a Life Insurance policy is the one which covers a person for his or her entire life.
It is a contractual agreement between an individual and an insurance company whereby an insurance company pays a certain sum of money after the death of the policy holder. The policy holder on the other hand during his life time pays a premium to the insurance company.
In most cases, money is paid if insured events take place. By insured events it is meant that the death of the person who purchased the insurance is because of the events that have been specified in the contract. The most common type of insured event that is specified in a contract is serious illness.
Life insurance policies can be of different types. On the basis of the needs and requirements, a person can purchase the plan that appears to be the most feasible.
A term life insurance policy or a temporary insurance policy is the one which is very popular and the most commonly used type of a life policy. This type of a policy covers the life of the person being insured only for a specific period of time; say a period of 5, 10 or 20 years. If the person who has been insured with the plan dies within the term of the policy, the beneficiaries get cash benefit. However, if the policy term expires and the policy is not renewed, no cash benefits are given out by the insurance company.
A whole Life Insurance plan is the one which covers the insured person for his or her whole life. There is no fixed time for the policy to cease. When the person who holds the insurance policy dies, a specific sum of money is paid to the beneficiaries.
Term life insurance policy requires the policy holder to pay the same amount of premium as the cost of this policy is spread across several years. The cash benefit is paid in a lump sum as the cash get accrued over a long period of time.
A universal life policy is the one which pays a sum of money after the death of the policy holder. This type of insurance is divided into death benefit and cash benefit. Cash benefit can be withdrawn as and when the person who holds the policy requires money.
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