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Life insurance policies: Types of policies and their benefits

BY: David Prakash Kumar | Category: Business and Finance | Post Date: 2009-08-04

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   David Prakash Kumar
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Each country may have different companies that provide life insurance. The company may be either nationalised or run by the government or the companies may be privately owned. There are various types of life insurance policies available. Some of these life insurance policies are tailor made for the public depending on the need.

Life insurance covers the life of a person. It is actually a contract between the party that provides the life cover and the person who needs the life cover. The company is paid premiums by the individual either yearly or any other frequency as required. In return for the premium, the insurance company provides life insurance for the individual.

The different types of life insurance are listed and explained below:

1. Term policy:

Term policy is for a particular period of time and the insurance covers the life of the individual. The term insurance can be used by all groups of people. During the term specified in the document . if a risk(meaning death) occurs to the individual whose life is insured, the insurance company pays the individuals family. In case the person is healthy at the end of the term, then the individual does not get anything in return. Due to this fact, term insurances are cheaper with less money as premium to be paid to the insurance company.

2. Whole life insurance:

This is quite different from the previous insurance. In a whole life insurance, the whole life of the person is insured. In case of death of he individual anytime during the policy, the family is paid the amount. The advantage of whole life insurance is that the family of the deceased individual gets a huge amount of money (depending on the premiums paid). The premium paid by the individual is invested by the insurance company in various avenues. Some of the money is invested in equity and others in government bonds.

3. Money back policy:

This is a concept in insurance companies that emerged after the other two above. In these kinds of policies, the individual pays money as premium. The insurance company covers the life of the individual. The company also invests the money. Not only this, but the insurance company also pays back some of the premium amount paid at fixed terms. This helps the individual by giving returns. It also covers the life of the person.

4. Other policies:

There are also various other kinds of policies that are designed according to the individual needs of the person seeking life insurance. Many companies offer different policies. Some invest the premium paid in equity. Others invest the money in a mix of equity and fixed bonds. The individual who has taken the policy can change these investments at least twice in a month. This flexibility increases the returns that an individual can earn.

These are some of the various policies that cover the life of the person. Each country and each company have different policies. Advice from an investment manager is necessary to select the correct insurance policy.

Article Source: http://www.saching.com

About Author / Additional Info: I am a physiotherapist by profession. A writer by interest. I take up freelance assignments for various websites and blogs. Comments are welcome at prakashdavid@rediffmail.com

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