Life insurance is an insurance in which the policy holder's beneficiaries are provided with a death benefit if a person dies. It is a very important insurance for taking care of one's family. At his death the money from the insurance policy serve as a replacement of the original income that he earned. The life insurance policies offered are of two types. One is term temporary and the other is permanent policy.

Temporary

The temporary insurance is defined as an insurance that has a specific time period set at the time of issuance. The case of annual renewable term the time period is only of one year.

Term

Term life insurance provides insurance coverage for a certain time period say 5 years and the premium is also specified. The term policies don't accumulate any cash value over the years. These insurance are considered pure in which the insured gets only the benefit if he dies during the term otherwise he will get nothing. In term insurance there are three factors that need to be considered. One is face amount of the insurance, the premium cost and the term or number of years the policy will stay in affect. An important feature of this policy is this that it can be renewed even if a person becomes ineligible for insurance.

Permanent

The second type of life insurance is permanent life insurance in which the policy stays in affect until the policy has matured or in other words has been paid out. The policy can be cancelled by the insurer if the policy holder doesn't pay the premium but in other cases they cannot cancel it unless fraud has been done. The good thing about these insurance policies is that they accumulate cash value. The policy holder can use the cash value of the insurance policy at any time by borrowing or taking the entire benefit by surrendering the policy. There are three types of permanent polices. These types include whole life insurance, universal life insurance and endowment.

Whole

The whole life insurance has a certain level of premium and accumulates cash value. The advantage of whole life is that the death benefit is guaranteed, the premium is fixed for each year and mortality doesn't decrease the cash value of the policy. The disadvantages are inflexibility and internal interest rate of return.

Universal

Universal life insurance is a newer product and has greater flexibility. It has a cash account and the premiums paid increase the amount in this account. The interest paid by the policy holder is taken within the policy. Any mortality expenses are taken from the cash account. The death benefit given the insured is the amount that is left in cash account minus any surcharges.

Limited-pay

Limited pay insurance the premiums are paid for certain years after which no premiums paid. The common time period for this insurance is 20 years limited pay.

Endowments

These are more expensive then the whole life or universal life policies. In these policies at endowment age the cash value of the policy equals the death benefit that will be paid.