Kinds of Life Insurance
Life Insurance is of two types:
- Term Life Insurance
- Permanent Life Insurance
Term Life Insurance
Term Life Insurance is a type of Life insurance in which the term of the policy is for a fixed period of time, generally for 5, 10, 15, 20 or 30 years.
- The premium of these policy will generally be low because these policies do not carry cash value.
- One can afford for quite high value insurance policies
- If the person survives for the period, there will be no money paid
- Cost of premium increases over age because older persons have higher risk of death.
Permanent Life Insurance
- In a Permanent Life Insurance contract, a portion of the money paid as premiums is invested in a fund that earns interest on a tax-deferred basis. Thus, over a period of time, this policy will accumulate certain "cash value" which you will be able to get back either during the period of the policy or at the end of the policy.
- Examples: Whole Life, Universal Life and Variable-Universal Life
- Fundamental Terms: Insurable interest - uberrima fidei - Contract of Indemnity - Causa Proxima - Subrogation contribution - Representation - Warranties
- Life Insurance: Concept, Kinds