There are different life insurance companies; you can get most of the information you need from insurance brokers, financial advisors working for insurance companies, insurance company employees, and other sources. However, most of the information you receive will be general - or more like "sales talk" aimed at getting you to buy life insurance from the person you're talking to.
The truth is, there are many different types of life insurance available—not just the cradle-to-grave coverage offered by insurance vendors. Here are three of them.
Level life insurance
This is a type of cover with a specific face amount (death benefit) for a set number of years, with the premium generally kept constant throughout the life of the policy. The insurance period is fixed; it can be 1, 5, 10, 15, 20 and even 30 years.
The typical goal of this type of insurance is to provide the family with some financial protection in the event of the death of the insured in due course - to ensure sufficient funds to support the survivor and any dependent children. It can also be designed to cover loan or mortgage payments, again ensuring that the beneficiary is not burdened with the responsibility of repaying them when the insured dies.
It works like this. You are buying an insurance plan. This insurance will effectively cover you for the period or number of years specified in your policy. Even in this period, you will have to pay the insurance premium regularly. If you die within that particular time period, your family or whoever is your beneficiary will receive the amount of money specified in the plan. If you don't die within the term, you'll lose your premiums unless your policy says you'll get them back.
Life insurance with a reduction
This is done specifically to provide unpredictability for the repayment of the policyholder's loans and mortgages in case he dies before being able to repay them. The insurance cover is for a fixed period (usually equivalent to the term of the mortgage or loan) and the level of cover decreases during the life of the policy - usually in conjunction with the amount of the loan or mortgage (e.g. it is paid off, the amount of cover is reduced to cover the remaining balance). The premium remains constant for the duration of the policy.
Declining term insurance works essentially the same as level insurance in terms of duration and what triggers the payout. The only difference is the decreasing value of the coverage.
Whole life insurance
If you take out this type of insurance, your family or beneficiary will receive a lump sum. This money can then be used to pay for your children's education or just everyday expenses.
Of all three types, it is the most expensive in terms of insurance premiums. However, this type of insurance allows you to build cash value that you can borrow against. You can also surrender the policy in exchange for the full cash value of the policy. So this type of insurance is more flexible because it offers you more options. In addition, you have coverage for as long as you live, provided of course you keep up your premium payments.
The above are just three of the life insurance options available. It would be best to sit down with an authorized insurance company and discuss the best type of insurance for your specific needs.
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