There are three basic types of arrangement.
- Term insurance
- Whole life assurance
- Endowment assurance
Term life policies provide life insurance cover for a set number of years being the policy term (period) of cover. These are pure protection polices with no element of investment. If death does not occur during the policy term, then no claim exists and no payment made.
Whole life and endowment polices provide a form of cover that is certain to pay out a claim as long as the policy conditions are met. This certainty means that the policies retain an investment element and therefore have a ‘cash-in’ value. A whole life policy runs until the life insured dies so long as the premium has been paid. The endowment policies pays out either on the death or the life insured or the maturity date, which ever occurs first. These policies are sometimes known as ‘substantive’ polices.
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Term Insurance