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Life insurance is a contract where the policyholder pays premiums in exchange for a death benefit to be paid to beneficiaries upon their death. There are various types, including term, whole, universal, variable, endowment, and group life insurance, each with distinct features and benefits. Life insurance is important for providing financial security, peace of mind, and potential savings for the policyholder's family.

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14 views3 pages

Document

Life insurance is a contract where the policyholder pays premiums in exchange for a death benefit to be paid to beneficiaries upon their death. There are various types, including term, whole, universal, variable, endowment, and group life insurance, each with distinct features and benefits. Life insurance is important for providing financial security, peace of mind, and potential savings for the policyholder's family.

Uploaded by

ꯇꯦꯂꯦꯝ ꯁꯨꯁꯟ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

What is Life Insurance?

Life insurance is a contract between an individual (the policyholder) and an


insurance company. The policyholder pays regular premiums, and in return,
the insurance company promises to pay a specified sum of money, known as
the death benefit, to the policyholder’s beneficiaries upon the policyholder’s
death. This helps ensure financial security for the policyholder’s family and
dependents.

Types of Life Insurance

1.Term Life Insurance:

-Definition: Provides coverage for a specific period, such as 10, 20, or 30


years. If the policyholder dies within this term, the beneficiaries receive the
death benefit.

- Features:

- Lower premiums compared to other types.

- No cash value (no savings component).

- Coverage ends after the term unless renewed.

2. Whole Life Insurance:

- Definition: Offers lifetime coverage as long as premiums are paid. It


includes a savings component that builds cash value over time.

- Features:

- Higher premiums.

- Builds cash value that can be borrowed against.

- Fixed premiums and guaranteed death benefit.

3. Universal Life Insurance:

- Definition:A type of permanent life insurance with flexible premiums and


death benefits. It also builds cash value.

- Features:

- Flexible premiums.

- Cash value can grow based on interest rates.

- Adjustable death benefit.


4. Variable Life Insurance:

- Definition: Combines death benefit protection with investment options.


The cash value can be invested in various accounts like stocks and bonds.

- Features:

- Investment risk and potential reward.

- Flexible premiums.

- Cash value fluctuates based on investment performance.

5. Endowment Life Insurance:

- Definition: Provides a death benefit but also pays out the policy’s face
value if the policyholder lives to a specified age or after a certain period.

- Features:

- Higher premiums.

- Guaranteed payout at maturity.

- Savings-oriented.

6. Group Life Insurance:

- Definition: Offered by employers or large entities to their employees or


members, usually as part of a benefits package.

- Features:

- Lower premiums.

- Limited coverage.

- Often term life insurance.

Why Life Insurance is Important

- Financial Security: Ensures your family can cover living expenses, debts,
and other financial obligations after your death.

- Peace of Mind: Provides peace of mind knowing that your loved ones are
protected financially.

- Savings Component: Some policies build cash value, offering a savings or


investment element.

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