Life insurance covers the risk of financial loss due to the death of the policy holder. However, there may be other parties to this contract. A person can be insured by his wife where the policy holder is the wife however the insured person is the husband. The various types of insurances include whole life insurance, permanent insurance and term insurance.

• Term Insurance: Term insurance is short term in nature and provides protection for usually one year. This is the cheapest form of insurance that is available albeit the catch is that you do not get anything if the term expires. This type of insurance can be renewed periodically and requires lesser amount of premiums to be paid.
• Permanent Life Insurance: This type of insurance stays in force until the policy matures or till the event of the death of the insured person. These are more binding and expensive compared to term insurances. However, these are more popular in many developing countries compared to term insurances. The basic types of permanent life insurance are whole life coverage, universal life coverage, limited pay and endowment.
• Whole Life Coverage: Whole life coverage is good for people who want to pay a fixed amount of known premiums. Some advantages of whole life insurance include known and fixed premiums and guaranteed cash value. Another advantage is that the mortality and expenses will not reduce the cash value of the policy.
• Universal Life Coverage: Universal life coverage is more flexible as far as premiums are concerned. This is because premiums are based on interest rates (interest sensitive policies). A universal life insurance includes a cash account. Premiums paid are directed towards this account and interest (pre-determined by the company) is also credited to the account. Mortality and administrative charges are reduced from the account. There are two options for the insured in this type of policy. The first one pays the face amount on death and the second pays the face amount plus the cash value. The disadvantage of the latter is that the cost of insurance increases over time and so do premiums.
• Limited Pay: Limited pay insurances are those that provide the facility of paying all the premiums over a specified period of time and there is no requirement for paying any more after the period expires. The policy still remains in force. Usually there is ten year or twenty year limited pay insurances that generally mature at the age of sixty five.
• Endowment Insurance: Basically endowment insurance pays out, whether the insured lives or dies, at a certain age or after a certain period of time. These are more expensive compared to universal and whole life insurances.
• Riders: Riders are additional optional coverage available to the insured. The most common rider is accidental death or double indemnity. This type of rider pays twice the amount in case of the accidental death of the insured. There are many riders such as joint life, group life insurance, survivorship life insurance, and single premium whole life insurance. All these are going to cost more and should be avoided if possible.

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