Types of insurance; - SS2 Commerce Lesson Note

Whole Life Insurance:

Whole life insurance is a type of life assurance that provides coverage for the entire lifetime of the insured person. It offers both a death benefit and a cash value component. Whole life insurance offers lifelong coverage, providing peace of mind that the beneficiaries will receive a death benefit whenever the insured person passes away. It also serves as a long-term savings vehicle with the accumulation of cash value.

Death Benefit: In the event of the insured person's death, a predetermined amount of money, known as the death benefit, is paid out to the designated beneficiaries. This money can help provide financial support to the family or loved ones left behind.

Cash Value Component: Whole life insurance also accumulates a cash value over time. A portion of the premiums paid by the policyholder goes towards building this cash value. The cash value grows on a tax-deferred basis, meaning it is not subject to immediate taxation. Policyholders can access the cash value through loans or withdrawals, providing a potential source of funds for various financial need during their lifetime.

Premiums: Premiums for whole life insurance are typically higher compared to other types of life insurance policies. However, they remain level throughout the policyholder's life, meaning they do not increase with age. This can provide stability and predictability in terms of premium payments.

Endowment Insurance:

Endowment insurance is another type of life assurance policy that combines insurance coverage with a savings component. It is designed to provide a guaranteed sum of money, either upon the death of the insured person or at a specific maturity date, whichever occurs first. Endowment insurance offers the dual benefit of providing life coverage and acting as a savings plan. It provides a guaranteed payout either upon maturity or in the event of the insured person's death.

Maturity Benefit: With endowment insurance, if the insured person survives until the specified maturity date of the policy, a lump sum known as the maturity benefit is paid out. This can be used for various purposes such as funding education expenses, retirement planning, or any other financial goals.

Death Benefit: In the event of the insured person's death before the maturity date, the death benefit is paid out to the designated beneficiaries. This ensures that financial protection is provided to the family or loved ones in case of an unfortunate event.

Premiums: Endowment insurance requires regular premium payments, which can be higher compared to other types of life insurance policies. The premiums are determined based on the desired maturity amount and the duration of the policy.