An insurance policy that
pays a death benefit to beneficiaries (designated by the policy holder)
if the insured dies. In return for this protection, the insured pays a
premium, usually on an annual basis. Life insurance is a policy (contract)
that guarantees an exact amount of money to a designated beneficiary upon
the death of the insured person or to the insured if he or she lives beyond
a certain age. Life insurance can lessen the hardship and financial
loss from death by distributing funds to the beneficiaries. Brevard Insurance Brokerage can help insure your business or family's financial
Life insurance can be divided
into three basic types.
We can educate you about
provisions and types of life insurance policies. We can also explain about
incontestable provisions, suicide provisions, reinstatement clauses, excluded
risks, and settlement options.We will be happy to lay out thye particulars
about the different types of life insurance: Term life, cash value, whole
life, single premium life, universal life, variable life, and variable
Term insurance is written
for a specified number of years; protection expires at the end of the period
and accumulates no cash value. Commonly used as LEVEL TERM insurance. For example 5, 10, 20 or 30 year terms.
accumulates a cash value, which is paid when the contract endowes or is
surrendered. The premium never change, plans can be structured to
make a limited payments. For example, 10 year, 20 year or pay to age 65
Universal life - this
plan consists of three principles, cost of insurance, cost of administration
and mortality costs. These three costs with credited interest define the premium that is structured
to never increase. This also grows a tax deferred cash value and can be
borrowed or partially surrendered while still having coverage
Types of Life Insurance Policies
TERM INSURANCE. Term life
insurance is the simplest and least expensive type, as it pays benefits
only upon the policy holder's death. With annual renewable term insurance,
the policy holder pays a low premium at first, which increases annually
as he or she gets older. With level term insurance, the premium amount
is set for a certain number of years, then increases at the end of each
WHOLE LIFE INSURANCE. With
whole life insurance, the policy holder pays a level premium on an annual
basis. The policy usually covers until the end of the person's life, the
policy holder is overcharged for the premium, and the extra amount goes
into an interest-bearing dividend account known as a cash value account.
The policy holder can use the money in this account to pay future premiums,
or can withdraw it or borrow against it to cover expenses.
UNIVERSAL LIFE INSURANCE.
Universal life insurance was introduced as a higher-interest alternative
to whole life insurance. Universal life premiums are based not only on
the cost of the insurance, but also on the interest rate offered on investments.
Still, they are usually less expensive than whole life policies. Universal
life policies provide individuals with a wider array of investment choices
and higher projected interest rates. They are essentially similar to a
term policy with a fixed rate of interest guaranteed for a year at a time.
CURRENT ASSUMPTION LIFE INSURANCE.
Current assumption life insurance features a fixed annual premium for the
duration of the plan. This type of policy pays a set interest rate on premiums
received, less the actual cost of the insurance. They can be useful as
a tax-deferred investment vehicles. Policy holders may choose to overpay
their premiums early in the plan period to accrue cash value. They can
withdraw or borrow from the funds later for any purpose, including retirement
income, or can use the cash value to pay the premiums for the remainder
of the plan period.
RIDERS AND OPTIONS. Most
types of life insurance policies give individuals the opportunity to add
optional coverage, or riders. One popular option is accelerated benefits
(also called living benefits), which pays a percentage of the policy value
to the holder prior to their death if they are struck by a serious illness.
Another option, known as a waiver of premium, allows an individual to continue
coverage without paying premiums if he or she becomes disabled. There is
also TERM RIDERS for additional insured person, like spouse or children
that can be added. Many policies also provide an accidental death and dismemberment
option, which pays twice the amount of the policy if the insured dies or
loses the use of limbs as a result of an accident.