Life insurance is a form of a contractual arrangement between an insurance company (insurer) and a policyholder. The insurance company assures payment of a death benefit to a named beneficiary when the policyholder dies. The death benefit is promised by the insurer in exchange for premiums paid periodically by the policyholder.
Features of A Life Insurance
- It is binding legally on both the insured and the insurer
- For the insurance contract to be enforceable, the insurer has to disclose all material facts as regards his current or past health conditions
- The policyholder must make regular premium payments (usually monthly) for the insurance policy to remain in force
- Upon the death of the policyholder, the named beneficiary on the policy receives the death benefit.
Types Of Life Insurance
Term life insurance plans are the cheapest type of life insurance covers. They provide coverage with no savings/profits feature. They are the most affordable form of life insurance as premiums are lesser compared to other life insurance policies.
It provides pure risk cover with lower premiums that last for a fixed number of years usually between ten to thirty years. The sum assured is paid to the named beneficiary in the policy upon the demise of the policyholder during the policy term. However, If the policyholder survives the insurance term then there is no payout
Endowment Life Policy
Endowment policies are slightly different from term plans with the inclusion of maturity benefits. The term life policies which payout, only upon the demise of the policyholder during the policy term. The endowment policies, on the other hand, pay out the sum assured either in the case of death or survival of the policyholder.
Whole life policy
A whole life insurance policy provides coverage for the policyholder all his life. The core feature of a whole life policy is that the term of the policy is not stated so the individual enjoys the life cover throughout his life. The policyholder is required to pay regular premiums until his death, upon which the benefit is paid out to the beneficiaries of the policy.
In the case of a single premium insurance policy, the policyholder pays the entire premium for the term of the policy up front. This is as opposed to making monthly, quarterly, or annual payments.
The universal life insurance is a type of permanent life insurance that has a cash value feature which earns interest. it is one of the most flexible forms of life insurance because the premiums and death benefit payable can be adjusted.
Burial or Final Expense
This is a type of permanent life insurance that has a small death benefit. Despite the names, beneficiaries can use the death benefit as they wish.
There are many other types of life insurance policies sold by insurance companies asides from the ones listed above. However, these are the most common types of life insurance sold in many parts of the world.
Many life insurance policies also come with riders and add-ons to make the policies more competitive in the market