Life Insurance is a type of insurance that covers the life of a person. It can be defined as a contract between the insured person and the insurance company.
It is a contractual agreement between an individual and an insurance company whereby an insurance company pays a certain sum of money after the death of the policy holder. The policy holder on the other hand during his life time pays a premium to the insurance company.
In most cases, money is paid if insured events take place. By insured events it is meant that the death of the person who purchased the insurance is because of the events that have been specified in the contract. The most common type of insured event that is specified in a contract is serious illness.
Many types of life insurance plans are available for people these days. A feasible plan can be selected by a person according to his needs and requirements and after comparing the various types of insurance plans.
A term life insurance plan is the most commonly used life plan that is opted for by many people. Also known as a temporary life policy, this plan covers the life of the insured person for a specified period of time. This period may be 5 years, 10 years or even 20 years. During the term of the policy, if the person insured dies, the insurance company pays the sum of money to people who have been named as beneficiaries in the contract. On the other hand, if the term of the policy ends and the policy is not renewed, the beneficiaries are not paid any cash benefits.
A whole Life Insurance plan is the one which covers the insured person for his or her whole life. There is no fixed time for the policy to cease. When the person who holds the insurance policy dies, a specific sum of money is paid to the beneficiaries.
Term life insurance policy requires the policy holder to pay the same amount of premium as the cost of this policy is spread across several years. The cash benefit is paid in a lump sum as the cash get accrued over a long period of time.
Universal life insurance plan is the one which covers a person till his or her death. In universal insurance plans, the insurance amount is divided into death benefit and accrued cash. In this case, cash can be withdrawn as soon as cash value gets accumulated and so cash is not paid in a lump sum.
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