Life insurance is an essential form of saving that ensures financial safety for the future. Generally life
insurance is a savings plan taken by the policy holder in an insurance company that is best suitable for
Earlier life insurance plans were regulated to provide a considerable insurance benefits once
the policy holder dies. These plans act as a big support for the family that has lost the policy holder.
Nowadays there are many plans and they are formulated under three basic categories.
1. Term Life Insurance:
> As the name stands for, the term life insurance provides policies where the premium
amounts has to be paid for specific number of years (say 10, 20,.. years) for which the
contract has been signed.
> The major advantage of term life insurance is that it provides a good lump sum insurance
coverage at the end of tenure or in case of death.
> In case of death of the person during the tenure period, the company in which the policy
holder has taken the policy will pay the death benefit as beneficiary amount.
>Most of the insurance companies provide flexible time period options for term life
> Term life insurance has an age limit of maximum 65 years.
At the end of tenure period, some insurance companies also offer two types of return payment
of the premium
> Whole premium amount with the policy benefits will be returned back to the policy holder as
a single payment.
> In case of death of the policy holder the assured amount will also be paid in installments
from the first month.
Note: The important point to be noted in term life insurance is the premium payment amounts are
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2. Universal life insurance:
> Universal life insurance policies are different from term life policies where there is flexible
premium payment option i.e., the policy holder can analyze and choose to pay the premium
amount as much he wants to pay for the year.
> Universal life insurance also allows the policy holder even to skip payments depending upon
his previous payments and the balance premium cash values.
> Another advantage of universal insurance policies is the easy accessibility to cash values i.e.,
one can borrow amount from the cash values even when the policy holder is alive.
> Universal life insurance provides permanent protection policies for the policy holder.
> The growth value of premium amounts does not charge any income tax payments.
> Policies under universal life insurance add complement to Registered Retirement Savings
Plan (RRSPs) and The Tax Free Savings Account (TFSAs).
> Generally insurance companies provide single and joint policies under universal life insurance
> If the policy holder opts to pay lower premium amount, accumulation of cash value will be
very low and there is no way for expecting high cash back value.
3. Whole Life Insurance:
> Whole life insurance policies are generally termed as ordinary life policies. Here the policy
holder has to pay the premium throughout his life time.
> In case of death of the policy holder, the nominee gets an amount that was already
mentioned in the contract signed between the policy holder and the company.
> Whole life insurance allows the policy holder to withdraw the amount at any time.
> Policy holder can borrow amounts for his requirements from the benefits of the policy
> The maturity period of whole life policies is 100 years.
> The benefits of the policies at the time of death under whole life insurance are usually tax
> The policy holder can obtain the coverage for certain ailments and disabilities. This is the
most advantageous part of the whole life insurance policies.
The whole life insurance policies fall under two major categories: Participating and non-participating
whole life insurance
What is participating whole life policy?
The insurance companies provides dividend (but the companies does not assure that every time the
policy holder will get the dividend amount) for the policy holder that are considered and calculated as
extra earnings through investments and savings.
What is non-participating whole life policy?
This type of policies includes fixed payment rates and low premium payments that the policy holder can
afford. As the basic premium payment amount is low, the companies do not provide any dividend to the
Other than these types, the whole life insurance policies include some other major types like
Level premium policy – Policy that requires premium to be paid till the policy holder is alive.
Limited payment policy – The policy holder has to pay premiums for a particular duration but the
protection is life time
Single premium policy – Here the policy holder has to settle down the entire premium amount in a
single payment. Installments or balance to be paid later choices are not allowed.
Intermediate premium policy – This policy allows the policy holder to make some adjustments in the
premium amount if the company’s norms allow doing so under some conditions.
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The details mentioned above are of general nature, followed by most of the insurance companies. There
may be variations in the plans, premium amount, maturity value, term, etc. and they may differ from
company to company.
It is always better to read the terms and conditions carefully before opting for
any scheme under insurance. It is always better to go for an insurance which offers reliable payback