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What are  life insurance policies?

Life insurance policies, at the very basic level, refer to insurance that provides for financial assistance to your dependents and loved ones,in case of a sudden catastrophy leading to your death

Life insurance policies- Kinds of life insurance policies

There are about a million kinds of life insurance policies in the market today offered by life insurance companies. Largely,however these life insurance policies fall into two major categories

bulletTerm life insurance policies
bulletWhole life insurance policies

Term life insurance policies refer to life insurance policies that only provide for a financial return in case of the demise of the policyholder

Advantages of term life insurance policies include lower life  insurance premiums and a focus on the basis of life insurance- providing for financial cover to dependents

 Whole life insurance policies refer to life insurance policies that provide for both a  financial return in case of the demise of the policyholder and also a financial return at the maturity of the life insurance policy

The premium charged for whole life insurance policies is significantly higher than that for term life insurance policies.

Though there is a sum assured financial return as part of insurance settlements at the maturity of the policy,the long term nature of the investment makes the financial return subject to inflation risks as one cannot predict the inflation in years to come. Also, the returns from whole life insurance policies are significantly smaller compared to returns from other investment methods such as bank deposits, stocks,mutual funds and so on that are also more liquid investments and can be withdrawn at any time.

We would recommend only a term life insurance policy for all consumers,unless you are too lazy to invest in alternate investment avenues.



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Last modified: August 31, 2005