What is Life Insurance and how many types of Life Insurances are there?
There are two basic categories of life insurance; Term Life and Permanent Life Insurance.
By : Khushbakht Junaid
Life insurance is the insurance you should get now, and here is everything you need to know about life insurance.
What is Life Insurance?
A contract between an insurer and a policyholder is known as life insurance. In exchange for the premiums paid throughout the policyholder’s lifetime, a life insurance policy guarantees that when the policyholder dies, the insurer will pay a sum of money to named beneficiaries.
In order to implement the contract, the life insurance application must accurately explain the insured’s history and present health issues, as well as high-risk habits. It is more cost-effective to purchase life insurance at a young age. There are two basic categories of life insurance.
1. Term Life Insurance
Term life insurance is for a specific period of time. It pays a predetermined sum of money to your specified beneficiary if you die before the term is over. Term life insurance is the most basic and widely available type of life insurance policy.
When you purchase insurance, you must make payments. The money will then be distributed to your beneficiaries when you pass away. You have the option of receiving the funds in a lump sum, monthly installments, or annuity. The majority of people choose a lump sum payment.
The term length varies from 10 to 40 years. The policy will terminate at the end of the term. Policies are guaranteed by the issuing insurance company’s capacity to pay claims.
2. Permanent Life Insurance
This insurance differs from term life insurance because it does not expire. Instead, it has a death benefit and a cash value, which works as an investment and is tax-deferred.
Each month, a portion of your premium is deposited into your cash-value account. As a result, the more money you put in each month, the faster it grows. You can use the cash value to buy anything or get a loan with it.