The life of a people is surrounded by the risk of death. The life or property of individuals/families can destroy or damage at anytime. There is no guarantee about people’s life. Even the main earner of a family could die suddenly without any notice. And what happens next is- remaining family member falls into severe financial problems with other severe crises. To overcome such types of crisis, life insurance is most demandable at all times.
So what is life insurance? It is a legal contract between individuals and an insurance company. Individuals (beneficiaries of the policyholder) will receive financial protections or compensation after the death of the policyholder from the insurance company. But to get the final compensation, the insurance holder will have to pay the premium monthly/yearly for several terms or until death.
There are many types of insurance available. Life insurance, Home insurance, health insurance, and auto insurance are most common.
Before making the final decision to purchase any types of life policy, don’t forget to understand the following four terms relates to life insurance-
Premium: Premium is the price of the policy; policyholders have to pay as a monthly or yearly installment. The premium rate might defer depending on the risk profile of individuals, also individuals to individuals.
Death Benefits: Death Benefits are the benefits that the insurer offers to the dependents of the policyholder once the policyholder dies.
Cash Value: From each installment, a significant amount of amount store on the policyholder’s savings account, which is termed as cash value. The policyholder can withdraw this amount when they alive. Again they can leave it to grow with the death benefit.
The policy limit: The limit of the policy. For term life coverage, it is several terms. For permanent life coverage, it covers the whole life.
What is Life Insurance Coverage?
Life insurance is a contract between the policyholder and the insurance company. In a life insurance policy, the Insurance Company provides a maximum amount of money to the beneficiaries after the death of the policyholder. Beneficiaries will get money depending on the premium given by the insurer during their lifetime.
Before purchase life insurance, the policyholder must inform his/her past and current health conditions to the company, including any high-risk health condition, habits, risky employment, and so many others too.
To enjoy the financial benefits of life insurance and remain active in the policy, the insurer must pay the single premium or pay a regular premium up to policy mature.
Life insurance is financial support to the beneficiaries after the death of the policyholder. So, elderly parents, dependent child or special needed child, spouse –everybody can be the beneficiaries of the death benefits in the absence of the policyholder.
Types of Life Insurance Policy:
There are different types of life insurance available. The most popular life insurance is-
Term Life insurance-Also is known as pure life insurance. Time of Term life insurance is fixed in the different time period. It will be 10, 15, 20, or 30 years. In the case of term life, insurance beneficiaries will get benefits if the policyholder dies interim period of the policy. Or, after the maturation of the policy, insurers will extend the time period if they want. The policyholder can convert it into permanent coverage. They also can terminate the policy. The premium of a term life insurance depends on insurer health, age, etc.
Permanent or whole life insurance- Permanent life insurance will exist for the whole life of the insurer if they are not surrendered or terminate this policy. Whole life insurance is one kind of permanent life insurance containing cash value.
Level term, Increasing term, Universal life, variable universal, etc., are also some other popular types of life insurance coverage.
Advantages of life insurance:
Death benefit-The financial protection of your family is the most important and obvious thing of life insurance. The death benefit or face value is defined as the money given by the insurance company to the beneficiaries after the death of the insurer. The insurance company will pay death benefits to the beneficiaries if the policyholder death in the interim period of the policy.
In most cases, beneficiaries of the policyholder are the elderly parents or dependent children. The death benefit will give to the beneficiaries once the policyholder passed away. The insurance company confirms the face value after proper analysis of insured heath, age, any special risk available or not. The death value is a lump sum or regular monthly payments; beneficiaries can get it either of both ways.
Cash value-Cash value from life insurance has two benefits. Cash value act as savings accounts for policyholders. Policyholders can use this after withdrawing money as a loan with the paying policy of monthly installment. However, if the cash value is not withdrawn by the policyholder, it grows with the death coverage. Finally, it can increase the death benefits after insurer death.
Tex benefits- Among many advantages of life insurance, tax benefits are one of them. If you are a service holder, you can get a monthly salary. Borrowed a life insurance policy and escape from taxation. Both the cash value and the death benefits come from the life coverage, are tax-deferred.
Availability of loans-In case of the emergency requirement, the policyholder can borrow cash from their cash value. After a certain period of time, the cash value can withdraw as a loan. This cash value is repayable with a fixed interest rate.
Life is a certain period of time; death is permanent. If you are the main earner of your family, it is your main responsibility of you to ensure your family’s financial safety for the future. Especially if you die suddenly, perhaps there is nobody to look after your family financially. So you have to arrange such a system so that your family remains far from such miserable sufferings.
To give your family an upcoming secured financial life, life insurance is the best way. Even it will afford your family’s any financial need when you are no more!