Aspects That Constitute Life Insurance
Insurance can be defined as a process where the policyholder is cushioned by the insurance company if a loss has occurred. Life insurance is a contract between the insurance policy holder and an insurer or assurer, where the insurer commits to pay a designated beneficiary a sum of money in exchange for a premium, upon the demise of an insured person. The whole idea of life insurance has developed on the fact that human life is full of uncertainties and life of a person itself is uncertain. Majority of the people are not exposed to the idea of life insurance; they only get enlightened about it when they stumble onto it courtesy of their friends.
Life insurance is not an easy decision. The scheme of life insurance assures that if the death of the holder occurs, the dependents will get financial assistance to bear the loss. The acquisition of the life insurance policy is not limited to the employer alone; it can also be gotten from an insurance agent.
There are three types of life insurance: Whole life, Universal life, and Term life. In Whole life insurance, the lifetime coverage at a premium does not increase with your age after you buy it. With universal life, the premium amount and death benefits are flexible meaning that you can change a number of your premiums after you have bought them. The scope of the duration that is covered by term life is usually limited to the certain extent, and the rates of premiums are relatively cheaper as compared to the other two types.
The life insurance contract being a legal document, it must possess the death benefit, premium payment, and cash value account parts so as to be functional. The death benefit is the amount of payment the insured’s beneficiaries will receive from the insurer upon the death of the insured. The calculated amount of money to be paid on demise of the policyholder is referred to as premium payment. The account, where the money accumulates so that it can be used for its intended purpose, is what is referred to as cash value account.
Only someone who has an insurable interest, such as someone in your immediate family can buy you a life insurance policy. Financial disbursement to the ones you left behind and the money paid to be tax-free, are the peculiar traits of life insurance. Professional investment managers or your insurance company can be sought in order to get clear understanding of the venture you are about to get into. On exhaustion of all avenues select the right product.
Many products today offer optional features and services, usually for an additional cost, that you can add to your policy for a customized solution to your planning needs. Money is only paid to the listed dependents after the demise of the insured.