The insurance sector is currently one of the biggest markets and is growing day-by-day. People realize that they need to keep a reserve or back-up plan in case of untoward incidences where they may lose their lives or the use of their limbs. If something of this sort happens, especially to an earning member of a family, the financial repercussions can be devastating!

Making sure that your family or dependants are always secure and will be provided for in case of an unfortunate and untimely event is one of the main reasons that people opt for life insurance policies. Making a payment towards a premium every month or quarter means that the accumulated amount of the payout and interest can help to keep your family supported.

A life insurance policy also works as a kind of savings and wealth generation plan for the future. The interest that is paid by your insurance company can be periodically withdrawn or accumulated, so you can apply it to another investment or use it if required. You can even apply for a loan in the future against the accumulated value of the policy earnings.


Basic Life Insurance Policies and How They Work

Life insurance policies are basically divided into two kinds, based on the period of the policy itself:

  • Term Life Insurance – This type of life insurance policy is settled for a specific period, or term, after which it will need to be renewed. The premium amount that is originally decided may change upon renewal and is based on a variety of factors. These include age, health, lifestyle, earning capacity, etc.
  • Whole Life Insurance – The second kind of life insurance is based on a set amount of premiums that last your whole life, regardless of any changes in the factors mentioned above. We are going to take a deeper look at this kind, since it is one that most people generally don’t understand as well as term life insurance.


Whole Life Insurance – How Does It Work?

The main components of these policies are similar to term life insurance, but there are a few differences. To understand how this kind of insurance works, let’s take a look at some of the factors involved:

  • Permanent – Unlike term insurance, this policy covers you all your life and does not need to be renewed or reassessed every now and then. The original premium amount remains unchanged, so it is unaffected by inflation rates or changes in health or age.
  • Beneficiaries – Like term insurance, this kind of insurance offers you the option to add beneficiaries for the interest amount, during your lifetime. You can also make use of the benefits yourself, so it is highly flexible.


  • Returns – With the inclusion of a death benefit to the basic premium, the cash value can be withdrawn or reinvested, as you prefer. This makes it an extra investment that keeps accumulating all your life.

As an insurance policy that offers security and cover for the complete lifetime of the policy holder, whole life insurance is one of the most reliable choices for life insurance.