Life insurance is one of the most important foundations in managing your personal finances. Yet most people still remain skeptical and confused on this topic. There are many details that you need to learn and understand about life insurance.
Getting educated and properly informed will help you decide if this is the best solution and protection for you and your family. Here are some vital information to help you understand what life insurance is all about.
Additional Information on Life Insurance
- Life insurance policy – A policy is also referred to as a contract between the insurer or life insurance company and the insured also known as the policy holder. The insurer collects the premiums paid by the policy holder and pays out the claims such as death benefit, in the event of a death, to the beneficiaries. The insurer gets its profit from the premiums and claims.
- Life insurance compensates financial loss – It helps reimburse financial loss in case of situations such as loss of life. The beneficiaries are provided with monetary assistance to cover for the expenses and lost income. In unforeseen situations such as unexpected death, life insurance provides a peace of mind. It is beneficial especially for stay-at-home spouses or bread winners.
- Life insurance if for your beneficiaries – If you are supporting other people financially, life insurance will help support your beneficiaries through monetary claims. In case of death, your loved ones can receive financial support.
- Life insurance is a risk management tool – There are some insurance policies that incorporate some investment. However, it functions more as a risk management tool to help you plan your finances.
- Life insurance can cost less – There are policies with high premiums which includes all the best features an insurance company can offer. However, there are other options such as low premiums which are more suitable for some policy holders depending on their needs and eligibility.
- Term and permanent insurance – Term life insurance is the most simple, affordable and widely used. The premium paid by the policy holders is based on the assumption that the insured will die within a particular term of 10, 20 or 30 years.
Permanent insurance, on the other hand, has the same method but with an additional investment savings. This is also referred to as a cash value. The investment includes bonds backed by the insurer, variable life which offers options such as mutual funds, and universal life insurance which is designed with flexibility but with higher risks.
- Life insurance roles – These roles include the insurer, owner, insured and beneficiary. The insurer is referred to as the insurance company who will pay the claims in the event of a death. The owner is the policy holder who pays a premium to the insurer. The insured is the person where the policy is based on while the beneficiary is the party who will receive the insurance claims.
- Life insurance cancellation – After reviewing and evaluating your existing life insurance policy and if you feel that the policy is not appropriate for you, you need to discuss the options with your insurance agent. There are many details that need to be considered. You need to sit down and analyze the investment value, the premium paid, policy terms and agreements.
Before finalizing your decision in getting a life insurance policy, research and get involved in the details. After all, this is a big decision that will affect you and your loved ones.