Nowadays there are numerous companies that offer life insurance policies that it can sometimes be difficult to know where to turn to. Essentially all life insurance policies are similar, although insurance companies try to come up with original ideas and different classifications. Life insurance can be divided into two basic branches although the names may differ or options vary slightly.
Term life insurance Policy
This kind of policy is open to anyone and will cover a persons short term requirements. This means that if the policyholder should meet up with a very serious accident he or she can make a claim on the amount stipulated by the contract. This kind of contract will also compensate family members who are left to fend for themselves due to the death of a member of the family. Briefly, this policy covers the potential need for life insurance in the short term.
This kind of term life insurance is renewable and can be converted, ranging from one to one hundred years. It the policy covers a one year program then the expenses of the coverage increase each year that goes by up to the expiration date.
This policy will normally expire at the age of seventy-five. While if the policy is fixed to the age of 100 along with cash value it subsequently becomes a part of the insurance for 'whole life'. Quite often you will notice that it is less expensive to buy a whole life insurance policy than a non-cash one.
The second type of life insurance is the permanent life insurance policy. This type of policy covers the whole life span of the person. The value of this policy increases throughout the period one participates in the program. Terms such as Par and Non-Par will be frequently used in this type of policy and have specific functions.
Par whole life coverage generates dividends that are a partial return of the premium paid for coverage and investment growth. The amount of dividends keeps changing from year to year annually. On the other hand the non-par whole life insurance policies offer no dividends. The future cash values in these cases are not projected but assured or guaranteed.
Other premium policies are also available besides whole life policies, where a fixed premium is paid for a short term. The death benefit of this policy is leveled and paid once the premium ceases. You may also split the terms of premium payment into several years, fifteen, twenty or sixty-five. The terms and conditions in these cases remain more or less the same.
Universal life insurance policy is meant for people who require a life insurance, have a big marginal tax bracket, have big RRSP and pension contributions, paying a good tax on investment income, want to have an additional future income and have an investment prospect for at least 10 years. These policies are considered to be most difficult of all the insurance contracts.