Picking the Right Insurance When choosing life insurance it’s best to do some research and familiarise yourself with the basics, there are so many different types it is easy to be confused, below is a list of types of life insurance and a short description of what each one is.
Term Assurance: This provides life coverage for a specified term, payable on death within that term, and nothing else. For this policy, you should consider, the length of the term, premiums due, and face amount. If the insured lives beyond the term, nothing is payable. Whole of Life Coverage: Guarantees a death benefit in the event of the insured’s death regardless of how long you have the policy or premiums you have paid.
Critical Illness Benefit: Generally pays a tax-free lump sum in the event of heart attacks, stroke, renal failure, or a variety of life-threatening illnesses or diseases. Should death occur before a claim is made, usually all premiums paid are refunded Universal Life Coverage: This is a variation of the whole of life insurance, where the term life portion is separate from the investment cash portion. The money invested in the policy is invested into a money market fund as opposed to stocks, bonds, or mutual funds.
You add what amount you like on top of the minimum amount of premium. The insurance company invests the funds with returns that are then put into the premiums or left to accumulate. Death benefit and the premiums can be adjusted, and the insured can surrender part of the policy and withdraw some funds from the cash portion of the policy. There are two types of universal cover, Type one is a set death benefit for the insured regardless of premiums paid, and type 2 the death benefit is equal to a set amount plus the current cash value of the policy in the event of the insured’s death, type 2 generally pays out more than type one.
Limited Pay: A type of permanent insurance, premiums are paid for a specified period, and then the policy becomes free or paid up and remains in force until a claim is made Endowments: Endowment insurance is paid on maturity or sooner if the insured dies and a claim is made. Accidental Death and or Dismemberment: This is a limited life insurance plan that covers the insured in the event of a death due to an accident, including injury but not health problems or suicide. Also payable in the event of loss of limbs or loss of use of a limb or limbs resulting from accidental means only.
