A type of insurance which covers the life of a person is known as Life Insurance. It is a contract between an insured person and an insurance company which may either be a government agency or a private company.
According to this agreement, the insurance company agrees to pay a specific sum of money after the death of the person who is being insured. In return the person who purchases life insurance plan pays a premium at regular intervals of time.
It is important that the death of the insured person happens because of an insured event that has been specified in the agreement. Serious illness is the most common type of insured event that is specified in insurance plans.
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 plan is also known as a temporary insurance plan. This plan is the simplest and easiest one which can be purchased for insuring the life of a person. This type of a plan is the one which covers the life of a person buying this plan only for a specific period of time. If the person for whom the insurance plan has been purchased for dies within the term of the plan, the insurance company pays the sum of money. However, if the term ends and the policy is not renewed, the cash benefits are not paid out.
Whole Life Insurance plans are the ones which cover an individual for his or her entire life. There is no fixed time interval after which the policy expires. When the policy holder dies, the insurance company pays a specific sum of money to the beneficiaries named in the policy.
The premium for term life policy stays the same as the value of this policy is divided over many years. In this life insurance plan, cash benefits accrue over a period of time and are paid in lump sum.
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 Cash benefit can be withdrawn as and when the person who holds the policy requires money.
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