Generally a family is solely dependent on the breadwinner in the family and quite often the family suffers great hardships on the demise of the breadwinner. Life Insurance is primarily suited to protect the family from the hardships in such an eventuality. Life Insurance is an instrument of planning for the future. The policy holder pays regular installments during his earning life and on his death his family receives a lump sum amount.
There are three main categories of life insurance.
• Term Life Insurance: Simple and least expensive. Its objective is to pay a specified lump sum amount to the insured person if he is surviving at the end of the specified term, or to the designated person on the death of the insured person during the specified term.
• Whole Life Insurance: It pays a specified lump sum amount to the insured person if he is surviving at the end of the specified term, or to the designated person on the death of the insured person during the specified term on the policy holder’s death; it also provides periodic dividends and allows limited withdrawals from the policy during life time. Obviously, the premium you pay in this case is higher than that for term life. This policy permits a certain amount of flexibility in setting the terms of premium payments as well as recasting the sum assured during the life so as to suit the needs of the family;
• Universal Life Insurance: This policy is for the life of the insured and is looked upon more as an inheritance. This feature ensures that in the event of the death of the insured person, the family cannot become destitute.
Each of the main types mentioned above has its merits and demerits and which life insurance policy a person should buy will depend entirely on his/her requirements and conditions under which the policy is being purchased. The salient feature of making a provision for the family in case of loss of the breadwinner is achieved by all these life insurance policies..
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