Many people feel overwhelmed when confronted with life insurance. It doesn’t have to be that way. Think of it as coverage for your spouse or your dependents, if something were to happen to you.
In simple terms, life insurance is an insurance policy that provides a lump sum payment upon the death of the policyholder to a named beneficiary or beneficiaries. Now that doesn’t sound too complicated. In fact, buying life insurance has never been easier. There are many life insurance providers out there, with a range of policies to choose from. So what policy to choose?
There are basically two types of life insurance policies available: term and whole life insurance. Term life insurance is the cheapest and most basic form of life insurance coverage that is available. It basically covers you for an agreed period of time and pays out the insured amount, if you die within this period. However, no payment will be made, if you survive the maturity of the policy.
Term life insurance is a good option if you want to insure for the worst case scenario, for a fixed number of years. For example, if you have just bought a house and have young children, you may want term life insurance for 10 years, until the children have grown up or the mortgage has been repaid.
Whole life insurance, on the other hand, carries no time limit and pays out the insured amount whenever you die. This type of life insurance tends to have higher premiums, especially if you are older when purchasing it, as the payment is a certainty.
Nowadays, life insurance policies have become almost like investment vehicles and many have such features. For example, one type of whole life insurance will pay a bonus, depending on the profitability of your insurance company or unit-linked policies, where part of your insurance premiums are invested with the aim to add to your final pay-out.
>