In exchange for the Family Life Insurance, the policy owner agrees to pay an agreed upon sum every month or other time period. The illness or death cannot also be the fault of the policy owner. Therefore events such as suicide, war, rioting, or fraud are not covered by the insurer.
Types of Family Life Insurance
There are two main types of Family Life Insurance. They are Term Family Life Insurance and Permanent Family Life Insurance. They are very different and provide different advantages depending on each individual situation.
Term Family Life Insurance
Term Insurance is insurance that provides an individual or family an exact coverage amount for a specified number of years. Length of the term varies, but generally is available in increments of five years. In exchange, the premium is a specified amount and depends on three major variables:
- Length of Coverage: How long the insurance will last.
- Premium: How much the policy owner is paying.
- Face Value: How much the policy is worth
The downside to Term Family Life Insurance is that the insurance is only covered for a specific number of years. If nobody dies or contracts an illness they receive nothing. There are renewable family life insurance polices on a term basis and are an alternative policy if a family is actively looking for one. Unlike other types of family life insurance policies, suicides are generally covered unless it can be proven the suicide was only committed for insurance reasons.
Permanent Family life Insurance
Permanent Insurance is just as it says and lasts for the entirety of someone’s life. The beneficiary is guaranteed the money after a death unless suicide or some other fault of the person who dies occurs. Also, unlike term insurance, the only way a policy can be canceled is if the policyholder committed fraud during the application process. Permanent Insurance provides a return and is similar to an investment.
There are four types of Permanent Family Life Insurance
Whole Life Coverage – Whole life coverage contains an affordable premium, offers guaranteed cash values, and the premiums are fixed. The main advantage is that the policyholder knows the premium rate, guaranteed death benefits and guaranteed cash value of your policy. The return on a whole life coverage policy is not as high as other types of polices though.
Universal Life Coverage- Universal life coverage is a newer type of insurance policy intended on providing greater flexibility in premium payments as well as a much higher rate of return on the investment. The premium rate is very flexible and varies each payment. That is also a disadvantage because a premium payment one moth may be substantially higher then another month.
Limited Pay Coverage- Limited pay coverage is the simplest type of coverage. Premiums are only paid up until the policy owners reach the age of 65. They also can include 10-year terms or 20-year terms.
Endowment Policies- Endowment policies are life insurance policies in which cash value is built up within the policy itself and then equals the face amount after a certain period. When this happens it is said the policy has reached its endowment age. These life insurance policies are much more expensive because the premiums are paid over a shorter time period then other insurance plans.
Problems
Although Family Life Insurance policies protect a family in case of a loved ones death, they are insurance plans and are often abused. There have been many documented cases in which a family member has killed another family member to collect on their insurance policy. Other people have been convicted of faking their own deaths and collect on their insurance policy which often times is a newer and much more valuable policy. Despite all the criticism Family Life Insurance can protect a family financially, in the case of a death in the family. It is a safety net which millions of families worldwide take advantage of, so they do not need more stress after a death in their family.