What are the characteristics life insurance?

Answer 1

Life insurance may more properly be called "death insurance". That is, since everyone will at some point die, it is intended to pay a sum of money to the decedent's heirs, survivors, or other listed beneficiaries, upon death.

Life insurance is considered to be a "valued" policy, as there is no objective measure as to what one's life is worth. Therefore, although there are factors that should be taken into account as to how much life insurance is advisable (such as minor children that must be supported and educated), one is fairly free to buy as much life insurance as they can afford. Life insurance companies do sometimes impose limits on how much a person may buy based upon health and financial considerations.

Term insurance, one form of life insurance, is considered to be "pure protection" in the sense that it does not accumulate cash value. Instead, it pays the face value of the policy to the designated beneficiary when the decedent (insured) dies, according to the terms of the contract. Of course, all premiums must have been paid and the policy in force as of the time of death.

Whole life insurance (often called "permanent insurance") does accumulate cash value. Cash value may be likened to sort of a savings account within the policy. Part of the periodic premium is applies to the "protection" element of the coverage, and part goes toward the accumulation of cash value. In the early years of the policy, cash value accumulates slowly. However, depending upon the structure of the policy, it can accumulate more quickly. That is, in some policies, the "savings" portion is invested in mutual funds that the insured designates, and therefore the growth of the cash value fluctuates with the performance of the funds. In no event should this be considered to be a savings account or investment; insurance is protection, and the cash value element is just a tangential feature.

There may come a point in a whole life policy when the policy is "fully paid up" meaning that no further premiums need to be paid. Depending upon the structure of the policy, this can be 10-15-20 years. Naturally, the amount of premium payable over that time will be greater or less depending upon how long it takes to pay up the policy. In contrast, premiums on term policies are lower (because there is no savings element), and must be paid for the full term of the policy (which also can be 20 years or so).

Answer 2

Number one characteristic is that it provides a benefit upon the insured's death.

Secondary benefits are: cash value accumulation (on whole life and universal life insurance plans), which can be used as loans for personal use, to supplement retirement funds, or to increase the death benefit.

The term insurance policies can have a Return of Premium feature, that would return all premiums back at the end of the term (10, 20 or 30 years).

Answer 3

characteristics of life insurance