Life Insurance Comparison
With so many different types of life insurance (http://www.lifeinsurance.org/state/) on the market, people often have trouble distinguishing between alternate policies. The easiest way to get your head around the confusion that surrounds life insurance (insurance64.co.uk/life/general-life-insurance/) is to categorise different kinds of policies based on their fundamental differences. Life-based insurance contracts can be categorised in a couple of different ways, with the most simple way dividing policies according to how they were designed; as either protection based policies or investment based policies.
Pure protection policies are what most people recognise as traditional life insurance, and are designed to provide a benefit only at the time of death, serious disease, or serious injury. Investment policies, in contrast, are designed to facilitate the growth of capital, although many also have a traditional protective element as well. Protection based policies often fall under the category of temporary insurance, of which there are a few well represented types. Temporary life insurance comes in the form of term insurance, which provides coverage for a specific time period in exchange for a premium rate. Term insurance is a pure kind of insurance that is purely protective in nature, and can not be cashed out at any time for investment purposes.
In contrast to term life insurance are a number of permanent life policies, including universal insurance, whole life insurance, limited pay insurance, retirement provisions (Altersvorsorge) , and endowment life insurance among others. Permanent life insurance differs from temporary insurance in a number of ways, although the most significant difference relates to how permanent policies accumulate a cash value over time. Permanent life policies remain in-line until they either pay out or expire, and can not be cancelled at any time by the insurer. There are a number of different kinds of permanent life policies on the market, with the two most popular being whole life coverage and universal life coverage.
Whole life insurance provides a guaranteed death benefit for a level premium, and accumulates a cash value over time. Universal life insurance is similar to whole life in many ways, although it offers the insured party greater flexibility in payments and the chance of a higher return. Universal life insurance still accumulates a cash value, although this value does decrease over time. While there are many types of life insurance within each of these categories, a basic understanding of these differences is important for anyone researching life insurance policies in the 21st century.