Basic Knowledge on Life Insurance

by Fajar Nindyo
Basically, the various life insurance product sold by insurance company now is based on the three types : 1. term insurance 2. whole life insurance, and 3. endowment insurance. In this chapter, you will find the short explanation of each type.

The first type is term insurance. As the simplest traditional of life insurance form, this type provide an important basic foundation in life insurance product. "Term" means "limited period of insurance cover" for example 1 year, 5 years, 20 years and so on. Thus, term life insurance can be defined as the life insurance that cover insured death within the certain period of insurance. If at the end of of such period, death not occured, no benefit will be paid. Beside death benefit as the main cover, this policy can be added with rider benefit.

Further, term insurance can be divided into 4 (four) modified term insurance policy. First what we call as "level term insurance". "Level" here means death benefit remain unchanged within the period of insurance. For example, a 5-year term insurance with IDR 50 million death benefit means that it will cover the insured within 5 year and the beneficiary will be received IDR 50 million whenever happened as long still in period of cover. Usually, the premium for level term insurance always constant in every years.

The second form of term insurance is "decreasing term insurance" which the death benefit will be reduced within period of cover. This cover usually used as partner life protection in the business purpose. In the contrary, other type of term insurance is "increasing term insurance". The death benefit will be increased year by year within the certain period.

Other type of term insurance is "renewable term insurance" which gives the insured an option to renew policy after insurance cover ended without the evidence of insurability. The insurance company can not refuse the renewal insured proposal although he suffer an illnes. As the consequence, the insured will be charged more expensive premium.

The last form of term insurance is "convertible term insurance" which a policy holder has a right to convert his term policy to whole life insurance. As described previously, this type give possibility to policy holder not to prove the evidence of insurability. To prevent anti selection against insurer, the insurance company will restrict conversion option after the insured reach certain age, for example 60 years. The new whole life premium will be higher than term policy and the calculation will be based on the age at the time of conversion.

http://www.goarticles.com/cgi-bin/showa.cgi?C=613746