Life insurance, sometimes referred to as life assurance, provides for a payment of a sum of money upon the death of the insured. Life Insurance is insurance that provides a financial remuneration on the premature death of the policy holder. As in all insurance, the insured transfers a risk to the insurer, receiving a policy and paying a premium in exchange. The risk assumed by the insurer is the risk of death of the insured.

Types of Life Insurance

Term insurance --

Term life insurance is life insurance coverage at a guaranteed rate for a specified period of time. Term life insurance is usually the least expensive form of life coverage. You purchase coverage for a specific price for a specified period. If you die during that time, your beneficiary receives the value of the policy. There is no investment component.

Whole Life Insurance --

Whole Life Insurance is also known as Ordinary, Standard or Permanent life insurance. Premiums remain level throughout the life of the policy, and the company invests at least a portion of your premiums. Some firms share investment proceeds with policyholders in the form of a dividend. Unlike term insurance, whole life insurance provides insurance coverage for the lifetime of the insured. Whole life insurance policies also provide tax-deferred buildup of cash value, payable upon surrender or payment default.

Universal life insurance --

Universal life insurance is permanent life insurance with premiums that are not guaranteed. The company chooses the investment vehicle, which is generally restricted to bonds and mortgages. To a certain degree one can “design” a premium on this type of policy. The investment and the returns go into a cash-value account, which you can use against premiums or allow building. Universal life insurance often can be set up with a lower premium initially than whole life insurance. A variation of a universal policy, often called universal variable life, allows policyholders to choose investment vehicles.

Variable life insurance --

Variable life insurance policies are cash-value policies that allow you to choose how your premium is invested from among a package of alternatives offered by the insurer. With a variable policy, there is usually a wider selection of investment products, including stock funds. At any time, the face value of your policy depends on how well the investments you’ve chosen are performing. As with a universal policy, returns on investments can offset the cost of premiums or build in the account. And depending on the type of policy, the beneficiaries will either receive the face value of the policy or the face value plus all or part of the cash account.