Whole-Life Insurance
Whole-life insurance provides for the payment of the face amount of the policy on the death of the insured, whenever it might occur. Premium payments are made during the entire lifetime of the insured person; this differs from limited-payment and endowment policies. All cash-value policies like whole life, endowment, and limited-payment life are required to provide values that cannot be lost should the insured terminate the policy. Such benefits provide that the insured may obtain the cash surrender value and terminate the policy; or the insured may obtain a paid-up whole-life policy in a reduced amount; or he or she may obtain term insurance for the full face amount of the policy for a specified period. A loan provision in all such policies permits the insured to borrow up to the full amount of the cash surrender value at any time, subject to specified limitations.
Limited-Payment Life Insurance
The limited-payment life policy provides for premium payments for a specified number of years (for example, 10 or 20, or until age 65) unless the insured person dies sooner. A single-premium life policy is a special case of a limited-payment policy. Premium rates for limited-payment policies are higher than for ordinary life insurance policies because the pay-in period is shorter.
Endowment Insurance
Endowment policies are payable at the death of the insured or on a specified maturity date if the insured is alive. Premiums generally are payable from the date of issue until the date of maturity but may be limited to fewer years or even to a single lump-sum payment. Premium payments on endowments are high because a large cash value is built up in a relatively short time. Endowments combine savings with insurance, and such policies may be used to provide for college education, mortgage payments, or retirement purposes. This type of policy lost popularity when competing savings mediums began paying higher interest rates in the 1970s and early '80s. More competitive interest rates have not yet restored its standing.
Term Life Insurance
Term insurance provides benefits only if the insured dies within a specified period. If the insured survives up to the end of the specified period, the contract is terminated unless renewed. Because the premium for a term policy pays only for the cost of the insurance protection during the term of the policy, term insurance generally has no cash surrender value. The insured may be allowed to renew for another term without a medical examination. The premium, however, increases with each renewal because it is calculated on the age of the insured at the time of renewal. Term insurance is often used by the head of a family to obtain additional temporary insurance when the children are young. Term insurance policies frequently provide the insured with conversion options to whole-life policies.
Credit life insurance is term insurance against a loan taken out on some major purchase such as an automobile. It generally decreases in amount as the loan is repaid. It protects the borrower's family as well as the lender against the debt that remains unpaid at death
Whole-life insurance provides for the payment of the face amount of the policy on the death of the insured, whenever it might occur. Premium payments are made during the entire lifetime of the insured person; this differs from limited-payment and endowment policies. All cash-value policies like whole life, endowment, and limited-payment life are required to provide values that cannot be lost should the insured terminate the policy. Such benefits provide that the insured may obtain the cash surrender value and terminate the policy; or the insured may obtain a paid-up whole-life policy in a reduced amount; or he or she may obtain term insurance for the full face amount of the policy for a specified period. A loan provision in all such policies permits the insured to borrow up to the full amount of the cash surrender value at any time, subject to specified limitations.
Limited-Payment Life Insurance
The limited-payment life policy provides for premium payments for a specified number of years (for example, 10 or 20, or until age 65) unless the insured person dies sooner. A single-premium life policy is a special case of a limited-payment policy. Premium rates for limited-payment policies are higher than for ordinary life insurance policies because the pay-in period is shorter.
Endowment Insurance
Endowment policies are payable at the death of the insured or on a specified maturity date if the insured is alive. Premiums generally are payable from the date of issue until the date of maturity but may be limited to fewer years or even to a single lump-sum payment. Premium payments on endowments are high because a large cash value is built up in a relatively short time. Endowments combine savings with insurance, and such policies may be used to provide for college education, mortgage payments, or retirement purposes. This type of policy lost popularity when competing savings mediums began paying higher interest rates in the 1970s and early '80s. More competitive interest rates have not yet restored its standing.
Term Life Insurance
Term insurance provides benefits only if the insured dies within a specified period. If the insured survives up to the end of the specified period, the contract is terminated unless renewed. Because the premium for a term policy pays only for the cost of the insurance protection during the term of the policy, term insurance generally has no cash surrender value. The insured may be allowed to renew for another term without a medical examination. The premium, however, increases with each renewal because it is calculated on the age of the insured at the time of renewal. Term insurance is often used by the head of a family to obtain additional temporary insurance when the children are young. Term insurance policies frequently provide the insured with conversion options to whole-life policies.
Credit life insurance is term insurance against a loan taken out on some major purchase such as an automobile. It generally decreases in amount as the loan is repaid. It protects the borrower's family as well as the lender against the debt that remains unpaid at death
