| Knowledge of the types of life insurance available | | | | further evidence of insurability.e) Refundable term |
| can help you avoid buyer's remorse. There are | | | | plans - These are usually the most expensive |
| myriad life plans that are designed to suit different | | | | type of term insurance. The idea is that if the |
| needs. The primary division of life insurance plans | | | | plan attains maturity, the accumulated premiums |
| is permanent versus temporary. From this, life | | | | paid would be refunded to the policy owner |
| policies are structured differently according to | | | | (without interest). The utility of this type of term |
| factors like premium rates and supplementary | | | | insurance is dubious. |
| benefits offered. | | | | Permanent life insurance plans are arguably more |
| Term life plans exist either for a specific number | | | | varied than term plans. They are divided into |
| of years or until the insured attains a certain age. | | | | whole life and universal life plans. Upon death of |
| Term plans do not bear cash values. They are | | | | the insured, the sum assured and/or net cash |
| not to be confused with endowment insurance | | | | value is paid to the beneficiaries or estate of the |
| that is designed to provide either a death benefit | | | | insured. In the case of maturity, the net cash |
| before maturity or an endowment upon maturity. | | | | value will be given to the policy owner. Typically, |
| Permanent life insurance could remain in force for | | | | insurers offer more optional supplementary |
| the lifetime of the insured (typically up to age | | | | benefits on permanent life insurance.a) Whole life: |
| 100). These plans bear cash values that are | | | | Cash values build in Whole Life plans after two to |
| referred to as a "living benefit". | | | | three years generally. This type of life insurance |
| Term plans are quite varied and branch out into a | | | | can be distinguished according to premium |
| number of forms:a) Level term life insurance - | | | | payment periods or inclusion of dividends. Not all |
| This is probably the most commonly used term | | | | whole life plans are the same.b) Universal life: The |
| plan. This type of life insurance has a level death | | | | key dichotomy where this type is concerned is |
| benefit for a specific period of time. A level | | | | variable versus fixed. Fixed plans operate with |
| premium is normally associated with this type of | | | | declared interest rates while variable UL plans |
| term plan.b) Variable term plans - These plans can | | | | have fluctuating cash values and death benefits |
| either have an increasing or decreasing death | | | | based on returns from a mutual fund |
| benefit. With increasing term plans, the death | | | | investment-type. Some Universal plans have level |
| benefit is incrementally increased by specified | | | | premiums while other use increasing premiums. |
| amounts over the period. A premium increase | | | | An important point to note is that universal life |
| usually accompanies the change in death benefit. | | | | plans accrue interest from policy inception. This is |
| With decreasing term life, the opposite happens. | | | | a key difference between universal life plans and |
| These term plans are useful for mortgage and | | | | whole life. Another key difference is that universal |
| family income coverage.c) Renewable term life | | | | life plans are more flexible than their whole life |
| plans - These can be renewed or extended on | | | | counterpart. |
| maturity. Renewable plans usually have | | | | Whatever type of life insurance is chosen, it must |
| guaranteed insurability embedded in the contract. | | | | suit your needs. It is important to keep in mind |
| However, the premium changes to match the | | | | that life insurance plans differ not only in terms of |
| longevity risk of the insured at maturity.d) | | | | the type. For example, two insurers can offer the |
| Convertible term insurance - Some term plans are | | | | same type of plan with different stipulations and |
| renewable in the sense that they can be | | | | optional supplementary benefits. This merely |
| converted before maturity. In most cases, this | | | | empowers informed clients to select plans best |
| can be done without the insured having to provide | | | | suited to their circumstances. |