Life insurance policies are contracts between the insurer and the policy owner in which the insurer agrees to pay a certain sum of money to one or more beneficiaries upon the policyholder’s death. In exchange for this service, the policy owner pays a premium at set intervals. Here are the three basic types of life insurance:
1. Ordinary Life Insurance: This type of policy remains in place for the lifetime of the policyholder.
2. Whole Life Insurance: This type of policy protects the policyholder against premature death and also includes a savings account that accompanies the fixed and guaranteed premiums that a policyholder pays through the lifetime of the policy.
3. Variable Life Insurance: This type of policy both protects the policyholder against premature death and offers a built-in savings account that the policy user can invest in stocks, money market mutual funds and bonds.