Types of life insurance policy

Answer 1

There are two basic types of life insurance policies - Term and Permanent.

Term life insurance usually provides protection for a period of 1-30 years, provided that premiums are timely paid and the policy does not lapse. The standard terms (duration of coverage) are 10, 15, 20, or 30 years.

Term life insurance is "pure protection", in that there is no investment or cash build up within the policy. If you outlive the term of your policy, your coverage expires. Stated otherwise, it is the equivalent of "renting" rather than "buying" the protection (as in the case of whole life, where there is "equity" accumulation by way of cash value).

Permanent life insurance usually costs substantially more than term life insurance, depending on your age and health factors.

A mix of the two types of insurance is often a good idea to account for various life stages. Because term insurance has become relatively inexpensive, many recommend "loading up" on it when one has a young family and when the need for the benefits, in case of untimely death, is greatest.

Term insurance can be purchased with a variety of options, including the option to convert all or part of it to whole life at various point in time. While the premium will increase with the conversion, ordinarily it will be done without regard to then-current health condition. Another fairly common option is waiver of premium, which essentially provides that future premium payments will be waived when the insured becomes disabled (as "disabled" is defined in the policy). There will be an additional premium for these options.