Life insurance policies are generally contracts entered into by the insurance company and the policy holder where a payout is given on the occurrence of the policy holder’s death or terminal illness. Premiums apply to this type of insurance coverage as well and it can be paid either at regular intervals or as limp sums. Life insurance policies are usually paid in a lump sum on the death of the policy holder to any one named therein.
Life insurance policies are designed to give peace of mind to the holder of the policy in knowing that his or her dependants will not face adverse financial consequences that may arise due the policy holder’s death. Certain specific exclusions can be seen in life insurance policies. The insurance company can refuse to honor the agreement with the policy holder if it is proved that death was due to suicide, fraud, civil commotion, riots or war. This is in part to safeguard against unscrupulous people who may try to take advantage of these terms.
Another, more recent, version of life coverage is available to consumers who like more flexibility in the payment of premiums. This type of policy is known as a universal life insurance policy and incorporates a savings aspect to the policy which is tax deferred. Here, a part of the premiums paid by the policy holder is invested at the discretion of the insurance company with the guarantee of a minimum interest rate.
The advantages of a universal life insurance policy are that it is more flexible and allows the policy holder to adjust benefits and premiums according to the needs of different times and financial circumstances. If the insurance company does not do well with its investments, then the policy holder should ensure proper premiums are paid in order to keep the universal life insurance from lapsing.
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