Principal Types of Life Insurance

Principal Types of Life Insurance

Life Insurance

Life insurance is classified into two major types: term and whole life (also known as permanent life insurance). Term insurance is divided into level term and decreasing term. Whole life insurance has some sub-categories such as traditional whole life, variable universal life and universal life insurances. There are life insurance products for individuals as well as those for groups.

Group life insurance is a type of term life insurance policy which covers a group of people such as employees in a company or members of an association or union. It is also known as wholesale or institutional life insurance. During the underwriting, individual insurability is not usually put into consideration. The key factors that the underwriter focuses on are the size, financial strength and turnover of the group. The group life insurance allows the members of the group to maintain their own coverage by buying the individual type of insurance. The underwriting is done for the whole group and not for individuals.

 

Term Life Insurance

This type of insurance is the simplest and only pays claims if death of the insured occurs within the term of the policy. The term is usually a maximum of 30 years. These policies often include no other benefits. Term life insurance policy has level term and decreasing term sub-categories. Level term provides for the same amount of death benefit throughout the whole term period of the policy. Decreasing term on the other hand, decreases the death benefit annually over the entire term of the policy.

Whole Life/Permanent Life Insurance

Permanent life insurance covers the insured for their remaining lifetime. This type of insurance policy keeps accumulating a cash value until the day it matures. The owner of the policy can get the cash value through borrowing cash value, withdrawing the money, or surrendering the policy for which they will receive the surrender value. Whole life policy provides cover for a lifetime at a specified amount of premiums.