Life insurance coverage is available in several different types and offer different benefits as well. Although death benefit across the policies remains alike, yet premium costs, policy duration, and structures differ drastically.
Whole life insurance covers offer assured protection across the life span of the policy holder. Often, such policies are referred to as “permanent coverage”. Such policies attach “cash value” factor that is tax rebated and postponed at a contractual amount until the policy expires or surrendered. A portion of the premiums are invested into the insurance aspect of the policy, while some of it is spent on administrative expenses, the remaining balance is invested in markets to perpetuate growth. The interest accumulated on your investment is tax-rebated until it’s withdrawn over and above the base premium. Subsequently, the premium attracts a hefty interest rate. However, the cash accumulation can be utilized for paying the premiums if you decide to discontinue the payment schedule.
Universal Life insurance cover often referred to as adjustable life or flexible premium is a derivative of whole life insurance. It is a permanent policy offering cash benefits according to existing rates of interest. However, it differs from whole life on the basis of level of protection offered, cash value and costs of premiums. The premium amounts can be adjusted as per the convenience of the policy holder during the tenure of the policy. The interest earned on the cash value is usually assured not to fall beneath a certain limit and the earned interest is offered to the policyholder at periodic intervals.
Variable life insurance cover combines the regular savings and protection offered by the whole life insurance with growth probability of speculation funds. Such policies embrace two divergent components – separate account and general account.
The general account is the millstone account of the insurer which is not allotted to the individual policyholder.
The separate account contains several different investment funds like money markets, equity fund, or bonds, within the insurer’s portfolio. Due the association of these core investment features, the death and cash benefits fluctuate.
Term Life insurance policy is the most widely used. It helps to protect the beneficiary against financial hammering in event of the policyholder’s demise. However, it offers protection only for a limited time. The upper limit of the term period for such policy is 30 years and it does not create cash values. It is useful in situations of limited time period and when the cash available for cover is restricted. The premiums here are incredibly lower as compared to other types. However, the premium costs increase with the ageing policyholder and when the precise policy term arrives.
