There are a lot of companies that sell life insurance policies today. Even though the main point of the policy (to make sure that a person's survivors and the person themselves have a safe and secure life) doesn't change, companies try to be different from each other by putting people into different groups. This is called bifurcation.
In general, there are two parts to life insurance.
- Term Life Insurance Policy: A term life insurance policy can be chosen by anyone. This kind of policy is meant to take care of a person's short-term needs. For example, if the policyholder has a serious accident, he can make a claim for the insurance amount. But it also gives money to the people left behind when a family member dies. All in all, it's a policy that helps cover possible short-term needs for life insurance.
Term life insurance is usually a programme that can be renewed and changed. It can be between one and one hundred years. If it is a one-year programme, the cost of coverage goes up every year until the programme ends. Most policies end when the person turns 75. If the policy is good until you turn 100 and has a cash value, it becomes part of your "whole life" insurance. People often find that it costs less to buy a whole life insurance policy than a Term 100 policy with no cash value.
- Permanent Life Insurance: This is insurance that covers a person for the rest of his or her life. The more time you spend in this programme, the more valuable this policy becomes. In this setting, terms like "par" and "non-par" are often used. Dividends from par whole life coverage are a part return of the premium paid for coverage and growth in the investment. The amount of dividends changes from year to year. On the other hand, there are no dividends with non-par whole life insurance policies. In these cases, the future cash values are not estimates, but are certain or guaranteed.
- Besides this whole life policy, you can also get a policy with a quick pay premium. In these, you pay a fixed premium for a fairly short period of time until the whole thing is paid off. The death benefit for this policy is the same for everyone and is paid out when the premiums stop.
- A whole-life insurance policy can also be broken up into parts with different premiums for 15, 20, and 65 years old. In both cases, the terms and conditions are pretty much the same.
Universal life insurance is for people who need life insurance, are in a high marginal tax bracket, have a lot of money in RRSPs and pensions, pay a lot of tax on their investment income, want to have more money in the future, and can invest for at least 10 years. People think that these policies are the hardest ones to understand out of all the insurance contracts.
