What is Life Insurance? Types of Life Insurance – Easy Guideline

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What is Life Insurance? Types of Life Insurance
What is Life Insurance? Types of Life Insurance

Are you searching for an answer to what is life insurance? Then this informative blog is for you. We will give you the accurate and proper definition of life insurance. After reading this blog, you won't have to read another blog from anywhere. So let's begin.

What is life insurance?

Life insurance is an agreement between the policyholder and an insurance company where the policyholder agrees to pay an amount on a daily or monthly basis for a particular time or till the insured person dies and the insurer promises to pay a premium to a nominated beneficiary on the death of an insured person.

Depending on the agreement, other events such as terminal illness or serious illness may trigger such a payment. Other costs, such as funeral expenses, can also be included in the benefits.

Life insurance policies describe the limitations of the legal agreement and the terms of the agreement in certain cases. In most of the times, the following incidents are out of bound company's liability such as suicide, fraud, war, rioting, and citizen terrorism.

Points to be noted

Before purchasing life insurance, make sure that you have performed the following valuable actions appropriately.

  • Life insurance is one kind of blind contract or agreement between the policyholder and insurance company.
  • In most of the cases, medical clearance of policyholder is foremost. Because if a person is suffering from any serious diseases like cancer, aids, brain tumour etc. Then insurance company won’t let a person sign up for an agreement or contract of life insurance.
  • The policyholder will have to pay a premium on a daily or monthly basis depending on the agreement or contract.
  • Only the beneficiaries of life insurance will receive the insurer deaths’ value.
  • Before signing up for the agreement of the contract, you must read the policy again and again. If some of the points of the policy are not understandable, then you must clear the concept by asking the questions on the not understandable points.

Types of life insurance

There are different types of categories are under life insurance. We are going to explain in brief with some easy sentences.

01. Term insurance

Term life insurance is a type of life insurance that guarantees a premium to the beneficiary person if the insured person dies within the specific time. If the insured person doesn't die, then the policyholder will have to renew the life insurance.

02. Group life insurance

Group life insurance is a type of life insurance that guarantees a premium to an entire group of people of an office or community under a single contract or agreement.

03. Whole life insurance

Whole life insurance is a type of life insurance that guarantees a premium until the insured person dies. That means whole life insurance doesn't have any expiry date. It's a little bit expensive and complex to understand. The policy of whole life insurance will be filled up with so many terms and conditions. So before purchasing whole life insurance, you must read the policy again and again.

04. Universal life insurance

It is as much as same as the whole life insurance. But one thing is totally different from the whole life insurance, The policyholder has the right to change the daily or monthly premium at any time. If the monthly premium is changed, then the death value of policyholder will also be changed.

05. Variable life insurance

It is almost similar to whole life insurance. But variable life insurance has investing risk. The money that is paid by a policyholder goes to mutuals funds and the money is invested in different platforms. As a result, the whole process is working like investing money in a stock market where risk is available. We don't suggest you purchasing variable life insurance.

06. Variable universal life insurance

If the policy of universal life insurance and variable life insurance are mashed together, the new life insurance will be called variable universal life insurance. The policyholder of variable universal life insurance can adjust the daily or monthly premium or death value. It has also the same risk as much as variable life insurance. So we highly recommend you to avoid variable life insurance.

07. Simplified issue life insurance

Whenever you purchase life insurance like term life insurance, group life insurance, whole life insurance and other life insurances, a policy is written about getting all kinds of the expense of paramedical exams. But in simplified issue life insurance is under no exam policy. That means you will get only death value of an insured person. Other medical exams facilities are not available in life insurance.

08. Guaranteed issue life insurance

Guaranteed issue life insurance is effective for elder people. As long as the policyholder pays the daily or monthly basis premium, the insurance company covers the person. The coverage depends on age, condition, and state of residence.

09. Final expense life insurance

Final expense life insurance covers the expense of anything that is related to your death such as medical treatment, a funeral cost etc. It is especially for the elder people who want to buy cheap insurance at the end of life.

Reasons to have a life insurance

Death and risk factors are covered under the life insurance scheme but not under the general savings plan. If the insured person dies with a normal death, the insurance company provides the full money that was in the agreement or contract which will be many times larger than the premiums that are paid by an insured person.

01. Future safety

It helps to achieve the goal of living. Suppose you are the head of your family members and you are the only person doing a good job with a healthy salary. If you have fallen victim to an accident and that caused sudden death, then think about their condition or future. What will happen to them after your death? If you had purchased life insurance, then your family members might lead their life without suffering.

02. Peace of mind

When you have life insurance, you don't need to worry about the future of your family. Because your family will get the full premium from the insurance company. As a result, using that money your wife or any member can start a new business. So life insurance can bring peace of mind.

03. Financial security

All kinds of financial security of your family members can be confirmed through life insurance such as education fees, residential fees, food cost, medical treatment of family members etc.

Conclusion

Dear reader, we have come to the end of this informative blog post. We hope, this blog post was helpful for you to learn about the explanation of life insurance. If you liked this blog post and if the blog post has benefitted you, then please don't forget to leave your valuable comment and rating about this blog post in the below.

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