It provides an immediate estate that will enable your family to maintain their household after you die. Life insurance can also be used to build up cash reserves for future expenses, such as retirement or college tuition. By purchasing a life insurance policy, you are buying into a risk-sharing group. The costs of premiums for people of different ages in different risk categories can then be calculated on the basis of how much the insurance company will pay out in benefits to each group's beneficiaries. There are six types of life insurance available.
Term insurance provides a death benefit to beneficiaries for a specified period of time.
It can be renewable or convertible to whole life and features a low initial premium that rises with each new term. Term life typically has no cash value. Whole life insurance offers protection for life at a fixed premium. It provides a fixed death benefit and a cash value that can be borrowed against and that increases over the years Universal life insurance offers permanent protection, flexible premiums and death benefits, and a cash value based on premiums paid to date and current interest rates. Excess interest whole life insurance provides permanent protection, a fixed premium that the insurer may adjust after the policy is issued, a fixed death benefit, a cash value that grows dependent on market conditions, and the possibility that premiums may be reduced or dispensed with for one or more years if investments are sufficiently profitable.