What are the main types of life insurance available? In the U.S. market, there are two basic types of life insurance: Term life insurance and lifelong insurance (whole life insurance). The latter is in turn divided into several categories, which would be traditional whole life, variable life insurance (whole life variable) and universal life insurance. In the year 2003 there were 6.4 million of individual term life insurance policies, while those of permanent type reached about 7.1 million of policies.
What are the main types of life insurance available?
And as you can imagine, individual insurance policies are different from insurance policies that are sold in groups or groups. Here is an explanation of the two basic types of individual life insurance.
Term life insurance
This type of insurance is the simplest of life insurance.What are the main types of life insurance available?
The policy makes a payment when the insured person dies for the duration or term of the policy, which can go from 1 to 30 years. Most term insurance does not include other payment provisions.
There are two different ways of hiring term life insurance: level term life insurance and declining term insurance.
Level term life insurance: means that the death benefits remain the same during the policy’s validity.
Declining term life insurance: implies that death benefits vary and decrease over the years of the policy, usually at one-year intervals to the end of the policy.
In 2003, almost all term policies (97% of them) were leveled policies, i.e. the benefits did not decrease over the time of the policy.
There is more detailed information that you can see in the article the different types of term policies.
Permanent Life Insurance What are the main types of life insurance available?
Permanent life insurance pays benefits in the event of death, it does not matter to what age the insured person lives, even if it is to live 100 years.
There are three basic types of this insurance and each one of them has its variations.
The cost of the policy is calculated depending on the amount insured: for every thousand dollars of coverage there will be an amount X to pay premium. The cost per thousand dollars of coverage increases with the age of the insured person and obviously the coverage of a person who exceeds 80 years of age can become very expensive.
Traditional permanent life insurance: coverage of this insurance, i.e. the amount of the benefits payable after the insured’s death, and the price or amount of the monthly premium are maintained level, that is, it will not change during the period that the policy is Existing.
The insurance company may decide to charge a monthly or yearly policy that varies each year, but this would be very difficult to maintain for most people, so they average the cost of premiums and charge the same price from the beginning of coverage.
Thus, hedge premiums will be the same from the beginning to the end of the policy.
The initial premiums will be more costly than is required to cover the cost of the policy, so the insurer invests that superfluous amount so that it generates profits that will be used to supplement premium payments when the insured is higher and premiums r Esultarían more expensive than you pay monthly.
By law, when these “plus payments” reach a certain amount, they must be made available to the policy owners as cash value, if the insured decides that they do not want to continue with the original plan.
This accumulated value is an alternative benefit, not an additional benefit of the policy. In other words, the owner of the policy may perceive it as an option, but it is not added to the compensation value payable to its beneficiaries in the event of the insured’s death.
Variable life insurance and Universal life insurance: In the decades of the years 70 and the years 80, these two additional types of permanent insurance were introduced to the market. There is more detailed information you can see in the article what are the different life insurance options?