An ordinary life policy is a type of life insurance that provides coverage for a specified period, usually the policyholder's entire lifetime. It is a traditional form of life insurance that offers both a death benefit and a cash value component. This policy is primarily designed to protect beneficiaries financially in the event of the policyholder's death, giving them a lump sum payment.
The ordinary life policy typically requires the policyholder to pay regular premiums over the policy's duration. These premiums are determined based on factors such as the policyholder's age, health, and the desired death benefit amount. Premiums may remain constant throughout the policy or increase over time, depending on the terms and conditions set by the insurance company.
One of the key features of an ordinary life policy is the accumulation of cash value over time. A portion of the premiums paid by the policyholder is allocated to a separate account, which earns interest or dividends. This cash value can be accessed by the policyholder through loans or withdrawals, providing a source of financial flexibility.
Unlike term life insurance, which only covers a specified period, an ordinary life policy provides lifelong coverage, making it a popular choice for individuals who want to secure their family's financial future. However, this type of policy tends to have higher premiums compared to term life insurance due to the cash value component and the extended coverage period.
Overall, an ordinary life policy offers both a death benefit and a cash value component, providing financial security and flexibility to the policyholder and their beneficiaries.
