Life Insurance

Life insurance policies are one of the oldest types of insurance available, and a type of insurance that most people will come across at some point in their life. They are inevitably linked to health insurance plans and dental insurance plans as being part of a long-term provision for the health of an individual and their family. Life insurance of itself is probably the simplest and should be the cheapest of all types of insurance. This is simply because insurance companies can work out exactly rateable factors in terms of morbidity and life expectancy that gives them an exact science almost of how much to charge for it.

Many people’s experience of life insurance policies will be much more complicated than it needs to be. This is because often the simplicity of a life insurance policy is complicated by making a life insurance policy also part of some type of savings or investment plan. A life insurance policy can also be joined to some type of health insurance plan, or a health plan that is specifically limited to something like critical illness cover or a personal accident plans.

All these types of health insurance plans that are linked to life insurance are perfectly legitimate plans, but because they merge life insurance with some type of health insurance benefit it is often difficult to assess whether they are really as beneficial as having separate plans would be. There are essentially two types of life insurance plans –

Term life insurance

Whole life or permanent life insurance

Term life insurance

A term life insurance is quite literally what it says. Someone will buy a term life insurance policy for a specified period of years, normally between 20 and 40 years, and pay a fixed or possibly decreasing premium per annum over that period of time. The policy will be for a specified cash value, and if the individual dies during that period than the benefit will be payable under the policy.

If the individual does not die during a policy period, then at the end of it policy will expire, or possibly the individual be given the option of converting it to a whole life or permanent life policy.

Whole Life or Permanent Life policy.

A whole life or permanent life policy tends to be an open-ended policy for the entire lifetime of the individual, that provides life insurance cover alongside some type of savings or investment plan that also covers the lifetime of the individual.These types of policy normally give the individual varying degrees of flexibility concerning the type and level of cover available, the sum insured, the level of premiums payable and when they are payable as well as varing degrees of control over the type of investment and savings options within the policy.

Insurance companies on the whole prefer to push these types of policy as opposed to simple time insurance policies, largely because the insurance company makes more money out of them. That, arguably, is standard business practice is, but from an individual’s point of view they need to be able to separate out what they are paying and what they need for straightforward term life insurance, any type of savings or investment plan and any type of health plan that they might need.

It can often seem attractive to have one policy or a number of policies with the same company that seem to meet an individual’s needs, but this can also blur both the costs and the benefits involved. Much better for an individual to have separate quotes for each type of insurance that they need, and an understanding of the types of benefits available, and then compare those with each other on a like-for-like basis.

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