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Insurance - Head Matters


3. Life Insurance

a. Types of life insurance

There are two general types of life insurance: term and permanent. 

Term life insurance is the simplest form of life insurance. It provides protection for a certain amount of time and allows the policy owner to renew the policy for additional time without requiring a medical examination. Usually the policy owner can renew for a set period of time or up to a certain age. Sometimes the premium for a term life insurance policy increases each year, but some policies offer a level-term premium, which will guarantee a set payment for a specified number of years.

If the insured people do not die during the time they are insured, the insurance company does not pay anything when the policy ends or when the insured dies after the policy ends. The insurance company is betting that the person they’ve insured won’t die earlier than expected—they’ve based their expectations on lots of research. However, the insured person has purchased the insurance just in case he or she does die.

Permanent life insurance is offered in a variety of types: whole life, variable life, universal life, variable universal life, indexed universal life, and others. All permanent insurance is designed to be paid to the beneficiaries when the insured dies – no matter what the age. Also, permanent insurance has a cash value, which means that a policyholder can take loans and withdrawals against the policy. With permanent insurance, you can choose to pay your insurance through their lifetime or for a limited number of years. Permanent insurance is considerably more expensive than term insurance because there is no time limit or term. 

One other option worth mentioning is that some insurance companies are offering “return of premium term.”  This type of policy allows an insured to get all of their premiums back at the end of the contract period if the insured has not died.
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