What Types Of Life Insurance are Available?

Types of life insurance include:

» Individual Life Insurance
» Credit Life Insurance
» Group Life Insurance

We will touch briefly on credit life insurance since this product is sold by Kentucky Home Life. We will talk about group life insurance since many people have group life coverage. Finally, we will then talk exclusively about individual life insurance.

Credit life insurance is written to cover large purchases such as trucks, automobiles and large appliances when these items are purchased and financed. Typically, the premium is paid as a single premium and financed as part of the purchase. The policies can be financed and written for periods up to 120 months. The beneficiary of this insurance is typically the financial institution which provided the financing for the purchase. The premium for credit life insurance completes the desired outcome for the insured (they purchase the desired item now) and the financial institution (the loan is repaid if they die). Credit disability insurance is often sold in conjunction with credit life insurance, but it pays when the insured is disabled under terms of the policy contract. Again, this insurance completes the desired outcome for the purchaser, insured and the financial institution. Typically, credit disability insurance provides coverage up to 60 months. Credit disability insurance is outside our discussion of life insurance, but is an associated product for credit life insurance.

Group life insurance covers a group of people with something in common with the other members of a group. For instance, they are employed by the same employer or are members of the same association. Typically, premiums are paid by the group. In many situations the members of the group give some money to the group to complete the premium. If an individual in a group dies, the individual's beneficiary receives the death benefit. Group health insurance and group disability insurance are typically offered to employees also. They are outside the discussion of life insurance. Kentucky Home Life does not offer group insurance at this time.

Individual life insurance is the subject of the remaining discussion. Some of the items discussed about individual life insurance will apply to credit life and group life. However, not all of the following discussions pertain to credit life and group life insurance.

Lifespan is an important question to the company that insures you. For example, most life insurance companies assume that everyone will die by the age of 120. In addition, to maintain financial solvency, a company must consider how much premium it must collect before it pays out a death benefit. With that in mind, if you buy a life insurance policy when you are 25 years old, you will pay a lower premium for the same policy than a 65-year old because you will pay the premium for a longer period of time. The 65-year old will pay more because there are fewer years for the company to collect premium before the person reaches 120.

An insurance company agrees to pay your beneficiary a specific amount of money when you die. In most cases, that amount is determined when you apply for life insurance and is specified in the policy you buy. Anyone with insurable interest can be named beneficiary including relatives, friends, organizations, charities, business partners, etc. Generally, you will name a primary and contingent beneficiary. The contingent beneficiary will receive the death benefit only if the primary beneficiary is no longer living at the time of your death.

You pay for the policy by making premium payments. There are numerous payment plans available including monthly, quarterly, semi-annually or annually. You may also pay the entire premium in one lump sum - single premium. The amount of premium you pay depends on a number of factors such as age, gender, health, occupation, whether you use tobacco, how much insurance you are purchasing, type of policy you are purchasing, and your lifestyle, such as if you participate in risky activities like race car driving or hang gliding.

Some life insurance policies provide death benefits only. These are called term products. Others provide a death benefit and cash values, which will be discussed later as permanent life insurance.