| Life insurance is a type of insurance wherein the | | | | is said to mature when the person reaches a |
| insured pays a premium for a period (often | | | | fixed age or dies. The policyholder needs to pay |
| lifetime) and the life insurance company provides | | | | premium for the entire period. This type of policy |
| insurance coverage against the risk of death. | | | | accumulates a cash value. The policyholder can |
| There are many types of life insurances or | | | | withdraw or borrow the money or surrender the |
| assurance (in the UK) available today. | | | | policy to receive surrender value. There are 3 |
| Basics: There are 4 parties in any life insurance | | | | types of permanent life insurances. |
| policy. The policyholder is the one who is buying | | | | 2.1 Whole life insurance. This has a level premium |
| the policy, the insured is the one against whose | | | | and corresponding cash value. Upon death of the |
| death the policy is made, the insurer that is the | | | | insured, the beneficiary receives the death benefit |
| insurance company and finally the beneficiary is | | | | only and not the cash value. The policy owner can |
| the person who will get the proceedings of the life | | | | borrow loans on the cash value. |
| insurance policy. It is mandatory that the | | | | 2.2 Universal life insurance. This has a flexible |
| policyholder should have a legitimate reason for | | | | premium and gives higher internal rate of return. |
| insuring a person's life. | | | | The policy has a cash account depending upon the |
| Types of Life Insurances: | | | | premium. The surrender value equals the cash |
| 1. Temporary Life insurance. This policy is also | | | | account balance. |
| called term life insurance that has coverage for a | | | | 2.3 Variable Universal life insurance. This is similar |
| fixed period of time. The policyholder needs to | | | | to universal life insurance with cash account. |
| pay a premium for a fixed period of time for | | | | However the money is invested by the insurance |
| which the insurance company provides insurance | | | | company in mutual funds for a greater return. |
| coverage. This type of policy does not | | | | Hence there is higher probability of increase of |
| accumulate cash value. | | | | cash account but the risk of reduction in cash |
| 2. Permanent Life Insurance. This type of policy | | | | account is also present. |
| provides coverage till the policy matures. A policy | | | | |